Yes, the Employee Retention Credit (ERC) is a real, legitimate payroll tax credit where even an essential business or nonprofit can qualify on government orders alone for a full or partial suspension of operations. By debunking the myths surrounding the ERTC, you can protect yourself against scammers, fraudsters, and trusted people giving you bad advice.
Is ERC Real
We can’t tell you how many businesses we’ve talked to, who simply don’t believe this fully refundable tax credit even exists, even when they hear many former senior IRS officials talk about it.
Just because some sketchy-sounding ERC company called you, or sent an email/postcard doesn’t make the employee retention tax credit a scam or even fraudulent.
Government Verified
The number of monthly Google searches for employee retention credit scam, ERC fraud, is employee retention tax credit real, is ERTC legit is astounding. But other Google searches, show the ERTC to be a very real payroll tax credit. Eligible employers that have any credit overage above tax liability can get a cash refund, rather than just a deduction or a write-off.
There are over 30,000 Google search results related to the ERTC on US government websites such as congress.gov and senate.gov. Further proof is available on all state government websites too.
- 28,000+ Google search results for ERC were found on U.S. Congress pages. You also can type site:congress.gov employee retention credit in Bing or Yahoo to view thousands more.
- 3,500+ Google search results for ERC were found on U.S. Senate pages, with more proof available when searching site:senate.gov employee retention credit at Yahoo or Bing.
IRS Verified
ERC refund checks are also 100% IRS verifiably real. So real, that you can even call the IRS just to confirm its existence, or receive Internal Revenue Service guidance on how to apply for the ERTC.
While ERTC eligibility requirements from the IRS can be confusing for business owners to decipher, this 5-minute quiz can easily determine your eligibility. If you want to know how much your refund should be, just request a free consultation.
- 3,500+ Google search results for ERC were found on the IRS website, with more available on Bing and Yahoo when searching for site:irs.gov employee retention credit.
- The ERC explained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 allowed a tax credit of up to $5,000 per employee in 2020 → IRS Newsroom
- They then added eligibility rules for Paycheck Protection Program loan forgiveness, reduced the gross receipts test to a 20% reduction, and allowed up to $7,000 credit per employee, per quarter in 2021 ($21,000 total maximum credit) in the Taxpayer Certainty and Disaster Tax Relief Act of 2020/Consolidated Appropriations Act (CAA) of 2021 → IRS Newsroom
- Recovery startup businesses and advance payment options were then added as an amendment in the American Rescue Plan Act of 2021, along with some modifications for severely financially distressed employers → IRS Newsroom
- The last ERC amendment came in the Infrastructure Investment and Jobs Act (IIJA) of 2021 which restricted 2021 Q4 eligibility to recovery startups, while adding early termination of Form 7200 tax withholding — IRS Newsroom
- In the Consolidated Appropriations Act (CAA) of 2021, the limitation on only claiming ERC or PPP was removed. This encouraged many businesses to forgo the 2.5x monthly payroll expenses in PPP Loan 2, when learning their ERTC refund was larger without PPP loan forgiveness.
- This IRS guidance notice, along with their employee retention credit page, FAQs, and 2020 vs. 2021 comparison chart can all be found on irs.gov.
Qualification Rules
When the Internal Revenue Service created the ERC rules, they certainly could have made them easier to understand. The thick language on how to get ERC qualified through partial or full suspension of normal business operations is discourage many business owners from applying.
Thankfully, many CPA firms and ERTC tax attorneys have fully dissected every single employee retention credit tax law clause and shared their findings with the rest of us.
Misunderstandings
The Internet Revenue Service estimated that 70-80% of all US businesses could potentially qualify for the ERC., yet only 20-25% of eligible employers have applied so far. Many employers are simply misinformed about their eligibility by their own accountants.
Essential businesses, profitable businesses, tax-exempt organizations, and even businesses that received had PPP loans forgiven can all qualify for this payroll tax refund. All they need to do is pass the gross receipts test, or prove governmental orders had a nominal impact on normal business operations.
Misinformation
Beyond the IRS’s confusing language, many company accountants and tax preparation services are spreading misinformation, simply because they don’t truly understand ERTC rules themselves.
Our ERTC refund specialists offer free consultations and their filings are backed with an iron-clad IRS audit protection guarantee. Some of their clients also include said accounting firms and tax prep services who were shocked about how much money they almost left on the table.
Tax Law Confusion
The vague, and highly complex language of IRS notices about the changes to employee retention tax credits often require a sharp legal mind to interpret. Even businesses that pass both ERC tests can get easily confused.
By choosing a nonprofit filing partner that offers free second opinions and the use of specialized tax attorneys, you can get honest advice on your true refund amount, while protecting yourself against any future ERC audit.
Accounting Laziness
Shockingly, we’ve come across a large number of business owners who are either too lazy to gather their paperwork or simply say they are too busy to even delegate the task right now.
Unlike PPP loans, eligible employers can spend their IRS refund check however they see fit. They can use the money to bolster cash flow, expand their locations, or increase staff or inventory.
Some of our clients were nice enough to split up their refund checks evenly among their employees, while others donated a large portion to their favorite charities. Others put the money into their retirement fund, while some splurged a bit on themselves, and their loved ones.