Employee Retention Credit (ERC)
Learn more about the payroll tax refund that helps eligible businesses receive up to $26,000 per employee kept on payroll during the pandemic.
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The Employee Retention Credit (ERC) explained
Eligible businesses can receive a refund of up to $5,000 per employee for all of 2020 and up to $7,000 per employee kept on the payroll for each quarter for Q1 through Q3 of 2021. That’s a total refund of up to $26,000 per employee kept on your payroll.
WHAT IS THE EMPLOYEE RETENTION CREDIT (ERC)?
ERC is a refundable payroll tax credit. Born out of the same CARES Act as PPP, its aim is to provide economic relief for small and medium businesses who retained employees during the COVID-19 pandemic. Initially, eligible employers could only take either PPP, or ERC. In 2021, as part of the Consolidated Appropriations Act, Congress amended this provision, allowing businesses to apply for both.
HOW IS ERC DIFFERENT FROM THE PAYCHECK PROTECTION PROGRAM (PPP)?
PPP was a forgivable loan. ERC returns the payroll taxes that your business has already paid. Once your business receives the ERC funds from the US Treasury, you do not have to pay back the credit.
HOW DO I KNOW IF MY BUSINESS QUALIFIES?
The IRS expects 70-80% of small businesses are good candidates for taking the ERC. If your business experienced disruptions to commerce, travel, or group meetings due to a government order, it might qualify! This includes supply chain disruptions, price increases, reduced hours, reduction in goods or services offered, were unable to travel, or attend conventions. Talk to one of our Refund Specialists to find out more.
DO I HAVE TO PAY THIS BACK?
Unlike PPP or other programs, this is not a loan. It’s free money for your business, and it’s up to you how you use it.
MY BUSINESS WAS PROFITABLE AND CONSIDERED ESSENTIAL, CAN I STILL QUALIFY?
Absolutely! Both Essential and Non-essential businesses alike can qualify, and a decline in revenue is not required. Many of our clients even had increases in sales, but still experienced disruptions or were negatively impacted.
WHAT IS YOUR FEE AND WHEN DO WE PAY IT?
There are no up-front fees or obligations to receive your refund analysis. Once engaged in recovering your business’ refunds, our fee is 25%, with no hidden costs. You will never come out of pocket to pay our fee. We’re paid only as your business receives its refund check. Our fee includes the preparation of your claims by a professional CPA or tax attorney who is experienced in qualifying, substantiating, calculating, and claiming ERC refunds.
HOW LONG WILL IT TAKE TO GET MY REFUND?
Multiple factors can affect the amount of time it takes to start receiving your business’s refund and checks are issued for each qualifying quarter. Typically, our clients receive their first check in 4-7 months following the submission of a claim to the IRS, with subsequent checks coming after that.
HOW IS THE REFUND CALCULATED?
Determining the proper amount of a refund is a complex accounting process. Although these are payroll tax credits, what you’ve paid in payroll tax has no bearing on your ERC calculations. The refunds are based on many factors including qualifying quarters, number of employees, hours worked, wages paid and if applicable, PPP loans, group health premiums and participation in other government programs to name a few.
DO I NEED AN ERC SPECIALIST, WHY CAN'T I DO IT MYSELF?
There are over 70,000 pages of tax code; it’s impossible to be an expert on all of them. We’re specialists in ERC, and we’ll get you the maximum refund. It’s like the difference between your family doctor and a neurologist. By concentrating on this one program, our strategic partners understand the intricacies and nuances involved in determining your eligibility and accurately calculating your refunds.
HOW MUCH CAN MY BUSINESS EXPECT TO RECEIVE FROM THE ERC?
The typical gross refund amount for Innovation Refunds’ clients is around $22,000 per employee as of March 2023. Our average gross refund amount per business is $295,957. The amount your business receives will depend on the accuracy of your payroll records, involvement in other relief programs, healthcare statements, owing back taxes, any deductions you may have previously taken, and other factors. These factors may also reduce the gross refund amounts noted above, which may mean that net refund is lower.