In the whirlwind of information surrounding pandemic-era relief measures, the Employee Retention Credit (ERC) has emerged as a beacon of assistance for businesses navigating these challenging times. However, misconceptions about the ERC can cause businesses to overlook or underestimate this valuable tax credit. Let’s debunk five common misconceptions about the ERC.
1. Misconception: ERC is Only for Big Businesses
This is far from the truth. The ERC was designed to benefit businesses of all sizes, from small local shops to large corporations. Whether you have one employee or one thousand, if you meet the eligibility criteria, the ERC can offer significant financial relief.
2. Misconception: If You Receive PPP, You Can’t Get ERC
Initially, under the CARES Act, businesses were not allowed to “double-dip” by claiming both the Paycheck Protection Program (PPP) loan and the ERC. However, the Consolidated Appropriations Act of 2021 changed this, allowing businesses to benefit from both programs provided that the same wages were not used. By allowing businesses to access both programs for different sets of expenses, they could potentially maximaize their financial assistance and relief.
3. Misconception: Your Business Must Be Closed to Qualify
While businesses that were forced to fully or partially shut down due to government orders may qualify for the ERC, that’s not the only way to qualify. Businesses that experienced a significant decline in gross receipts compared to the same quarter in 2019 can also be eligible.
4. Misconception: The ERC is Difficult to Claim
While the process of claiming the ERC involves careful calculation and detailed record-keeping, it’s not insurmountably difficult. Resources and guidance are available from the IRS, and tax professionals can provide expert assistance.
5. Misconception: The ERC Isn’t Worth Much
On the contrary, the ERC can be substantial. In 2021, it equals 70% of up to $10,000 in qualified wages per employee for each quarter. That’s a potential credit of $7,000 per employee per quarter.
Misconceptions can create unnecessary barriers to valuable relief measures like the ERC. By debunking these myths, we aim to help businesses fully leverage the financial aid available to them.
Stay tuned for more informative financial discussions.