ERC Advance Payment Methods: Fast Refunds in 2-4 Weeks

BusinessTaxesERTC
7 min read

Why wait 6-12 months for the IRS to process your employee retention credit tax refund check when you can get advance funding in a few weeks. After the IRS stopped the Form 7200 advance payment, several hedge funds and direct lenders started fast-tracking ERC refunds by allowing businesses to reinvest their refund checks with very little wait time.

Advance Payment

If you were to file your adjusted employer’s quarterly federal tax return (Form 941x) and claim ERTC today, you’d be lucky to wait only 5-6 months to reap the benefits of this fully refundable tax credit.

If you didn’t properly file your eligible employer qualifiers like government shutdown orders or properly demonstrate your decline in gross receipts, your process timeline might be 6-9 months. If you also forgot to deduct PPP loan forgiveness amounts from your qualified wages paid, it may take a year or more to get your refund money!

Fast Refunds

Luckily, the private sector started creating options for fast ERC advances, after the federal government called an end to the ERC advance payment option via Form 7200.

These private funding groups are typically formed with a mix of accounting firms, tax attorneys, direct lenders, and capital management companies. Together they created things like employee retention credit hedge funds, and more simplified, fast ERC refunds with a 2-4 week processing time.

For the average business owner, it’s near impossible to keep track of which quick ERC payment solution is not backlogged or which ones suddenly changed their eligibility requirements.

Thankfully, we’ve been lucky enough to partner with non-profit ERTC specialist who keeps tabs on all possible advance refund options. They will happily direct you to the refund option which best suits your needs. Just fill out their quick quiz below to see if you qualify for a fast employee retention credit refund.

If you take our simple 5-minute ERC Quiz you will instantly know if you are eligible for a 2020 or 2021 payroll retention tax credit refund, or as a recovery startup business. The IRS estimates that 70-80% of all US businesses will qualify for a refund after new legislation was added to include:

  • Non-profit organizations and companies that received PPP loan forgiveness
  • Businesses that turned a profit during the pandemic qualifying alongside those who had a 20% decline in annual gross receipts..

Monthly Interest

Another fast option to turn your employee retention tax credits into business cash flow is to use our filing partner that charges monthly interest into of flat rate fee. for an advance payment. If you have an A+ credit rating, you can pay just 1% internet per month. With just decent credit the interest rate could be still around 2%-2.5%.

Depending on how busy our filing partner is, their minimum refund amount can range from $50k-$100k.

If you were able to claim the credit 3-6 months ago, then the monthly interest option is usually cheaper than the fast refund flat fee. If you’re just figuring out how to qualify for the ERC now, then you’d need decent credit to make this advance payment option worthwhile.

If the current IRS refund delays of six to nine months get reduced in the future, then paying interest monthly could be the best advance payment option for all eligible businesses. Just take our quiz today to see if you qualify for a quick refund check.

Hedge Funds

When it comes to processing times, there’s not a whole lot of difference between an ERC hedge fund refund and direct lender ERTC refunds. The main issue with hedge fund advance payments is that they often don’t include guaranteed audit protection.

If a company only files your claims via a tax accountant without running a specialized ERTC tax attorney, you will increase the risk of an ERC audit. If the same hedge fund accountants do not thoroughly understand your exact local COVID-19 executive orders, you could even be leaving a ton of money on the table.

Not all of these tax refund hedge funds fit the true definition of a hedge fund either. Some are actually pension funds, while others are simply private investor capital. Either way, eligible employers who claim the employee retention credit through these funds, typically will receive their refund check within 4 weeks.

Currently, most hedge fund advance fees are several points higher than the fast refund advance fees offered by direct lenders. Typically hedge fund fees start at 15% if your ERC refund claim was already filed a few months ago. If you’re just filing a claim now, the advance fee is more likely to be 20-22%+, which is on top of a 15-20%+ claim processing fee (35-42%+ total).

Before you sign on the dotted line for a hedge fund advance, be sure to get a free second opinion from our ERC partner. They may be able to negotiate lower advance and processing fees for you, while also ensuring you receive the maximum credit available and have IRS audit protection.

Eligibility

The qualification requirements to apply for an ERC advance payment can vary depending on the refund payment type you choose. Typically, you will need to at least meet the following criteria to be refund advance eligible.

  1. 1o full-time W2 employees
  2. An expected ERC refund amount of $100,000 or more

No owners, spouses, close relatives, or persons living with a business owner can be counted as eligible W2 employees.

You can use our free ERC Calculator to get a rough estimate of how big your refund check could be, if you could qualify each eligible employee for the ERC’s maximum credit rebate.

PPP Loan Forgiveness

Being the recipient of a PPP loan will not disqualify you from receiving an ERC refund advance, only your employee count and refund amount matter.

If you received Paycheck Protection Program forgiveness during 2020 or 2021, you may need at least 11-20 W2 employees just to reach the $100k minimum. This is due to your PPP loan amounts being removed from qualifying wages, which then only produce an average refund of $5-10k per employee.

Recovery Startups

Receiving a cash advance for your employee retention credits is a lot harder in 2022 for recovery startup businesses. Most private lenders who offer advance credit payments require a refund credit equal to $100,000 or more, while others have a minimum of $150-$250k.

Since the maximum expected credit for a recovery startup is $50,000 per quarter, you’d need the maximum allowable for both the third and fourth quarters of 2021 to reach $100k.

That being said, our ERC program that works with smaller claims does offer certain advance payments, such as monthly interest payments. Just fill out our quiz above to get started, and let us know the amount of the credit expected, and how much funding your recovery startup business requires.

Analysis Fee

Do note that there is an extra cost involved if request an advance payment for your ERC payroll tax credit refund. While it’s not upfront, it will be misused from your total refund amount.

Typically, the processing analysis fee is 15-20% of your refund amount. This covers the cost of specialized ERC accountants and tax attorneys who need to review your claim before approving your refund advance. These specialists will run a fine-tooth comb over all of your local and federal government executive orders, as well as, your payroll documents and annual gross receipts.

Should their analysis produce a higher refund amount than your previously filed claim, then your advance payment amount will also increase.

Do note that just because a tax attorney is included in your processing analysis fee, does not mean you will be guaranteed IRS audit protection. Most ERTC advance payment options either don’t offer this or will charge you a higher advance fee.

If losing money is an issue for you, consider filing a normal claim with our non-profit employee retention credit specialists. This will save you money by receiving lower overall fees, as well as, ensuring they fight your claim if audited.

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Form 7200

On March 31, 2020, a few days after legislation for the employee retention tax credit (ERTC) was passed in the CARES Act the Internal Revenue Service issued IRS notice IR-2020-62. This was the first time IRS Form 7200 (Advance Payment of Employer Credits Due to COVID-19).

A properly filed Form 7200 once allowed an eligible employer to reduce federal employment tax deposits in anticipation of an employee retention credit refund. Employers filing form 7200 could also request advance payments for other business tax credits on their employment tax return, such as the Cobra Premium Assistance Credit, along with the Paid Sick and Family Leave Credit. These credits helped many severely financially distressed employers survive financial hardships caused by the covid-19 pandemic.

Unfortunately, as of January 31, 2022, qualified employers can no longer use IRS Form 7200 to request an advance payment of employer credits due to COVID-19. Fast refund checks, however, are now available with 2-4 weeks by simply when using our nonprofit ERC filing partner.