How To Claim Employee Retention Credit? 

 November 23, 2023

By  Jace W Campbell, CPA

Claim Employee Retention Credit

Understanding ERTC can be a daunting task… In essence, the ERTC is a fully refundable tax credit for employers. It’s designed to encourage businesses to keep their employees on payroll during periods of economic disruption caused by COVID-19. Its value? Potentially tens of thousands of dollars per employee, with maximum benefits reaching as high as $33,000 per employee. The calculations are complex, but the potential savings are substantial…

So how do you claim the ERTC? Well, that’s where things get interesting…

How to Claim Employee Retention Credit

You’re probably wondering: “how do I claim this tax credit?”… Firstly, you should know that almost every type of business and non-profit organization in the US can claim the Employee Retention Credits, provided they had W-2 employees on payroll during the pandemic and paid payroll taxes on those employees.

How Confident Are You In Your ERTC Eligibility?

Watch Our Video Explaining the Fraud We’ve Seen From National ERC Promoters

Initial Steps: Determine Your Eligibility

Embarking on your journey to claim the Employee Retention Credit, your first step is determining your eligibility. This involves a careful review of IRS guidelines to assess if you meet certain criteria. One such criterion could be experiencing a significant decline in gross receipts…

But what does this mean? Well, the IRS requires that a significant decline in gross receipts occurs when an employer’s gross receipts are less than 50% of its gross receipts for the same calendar quarter in 2019. Keep in mind, however, this method should correspond with how you report receipts on your income taxes or other reporting requirements. For example, if you pay taxes on an accrual basis, then consider these quarterly comparisons using accrual accounting…

Another consideration is whether your business was subject to a government shutdown order due to COVID-19. If it was, you may qualify for ERTC… Additionally, for non-profit organizations, receipt of grants may also be factored into this process.

One question that frequently arises is: “Can I still qualify if I did not have a significant decline in gross receipts?“… The answer is yes! It’s important to note that you can also qualify for the Employee Retention Credits if your business experienced a full or partial suspension of operations due to government orders related to COVID-19. This could include orders limiting travel, gatherings or business operations…

Remember: It’s not necessary for your business to experience both a significant decline in gross receipts and a suspension of operations. The criteria are either/or — one or the other will suffice…

You may wonder “How does the Internal Revenue Service define a full or partial suspension of operations?“… In simple terms, it’s when more than just nominal aspects of your business operations are suspended due to government orders.

Once you’ve determined and verified your eligibility status by reviewing these conditions and aligning them with your business’ situation, the next step is to gather the necessary documentation. This will support your ERTC claim and ensure a smooth process…

Remember, when it comes to dealing with the IRS, accuracy and thoroughness are key. Don’t rush through this step. Instead, be meticulous in documenting everything to strengthen your case…

Filing Your Claim: The Nitty-Gritty of Form 941 and 7200

The next stage in your quest to claim the Employee Retention Credit involves filing IRS Form 941, the Employer’s Quarterly Federal Tax Return… This form is used by employers to report income taxes, social security tax, or Medicare tax withheld from employee’s paychecks and to pay the employer’s portion of social security or Medicare tax.

When filling out this form, pay close attention to all relevant lines associated with claiming ERTC. Lines 11c, 13d, and 21 are crucial since these directly relate to ERTC… Remember: precision and accuracy are non-negotiable here. A single error could delay processing or even lead to a denial of your claim…

In some cases where an advance payment is needed due to insufficient employment taxes available to cover the credits, you might also need to fill out Form 7200, Advance Payment of Employer Credits Due to COVID-19… This can be done before filing your Form 941 for the quarter if you’ve already paid wages that exceed the amount of employment taxes owed.

Operating at this level of detail has a high potential payoff. In fact, some businesses have managed to recover amounts comparable to their entire Paycheck Protection Program (PPP) Loan! Though typically it might not be that large… And remember: there’s more financial impact in 2021 because the $10,000 limitation on qualifying wages resets for each quarter in that year.

As for deadlines? Well, the deadline for retroactive claims related to 2020 is April 2024; and for those related to 2021, it’s April 2025… These claims are filed using Form 941-X which amends previous quarterly returns.

But one word of caution here: don’t procrastinate! We strongly advise taxpayers against waiting until the last minute to file their claims. Congress could pass legislation to close the program early, so it’s better to act sooner rather than later… As they say, the early bird gets the worm. Or in this case, the Employee Retention Credit.

Dealing with Payroll Service Providers

If you use a third-party payroll service provider, they can assist with reporting these credits on your behalf… However, be sure to communicate clearly with them about your intention to claim ERTC, as they might not automatically do this for you. Collaboration here is key…

Common Questions Around ERTC

Can You Claim ERTC if You Received a PPP Loan?

A common question many business owners ask is: “Can I claim ERTC if I received a Paycheck Protection Program (PPP) loan?“… The short answer? Yes, you can. However, the wages used to claim the tax credit must not be the same wages used for PPP loan forgiveness. It’s a tricky balance…

What are the Specifics of ERTC for 2020 vs 2021?

Another common query revolves around the specifics of claiming ERTC for 2020 versus 2021… Essentially, changes in legislation have increased the credit rate from 50% of qualifying wages paid in 2020 (up to 10,000 annually per employee) to 70% of qualifying wages paid in any calendar quarter in 2021 (up to 10,000 per quarter per employee). This means you could potentially receive more credit in 2021…

Importance of Independent Eligibility Review

While many taxpayers have filed for ERTC, some might be skeptical about their eligibility… This skepticism could stem from misunderstanding IRS guidelines or simply being unsure about how these rules apply specifically to their situation. That’s why it’s crucial to consider an independent eligibility review conducted by professionals like JWC ERTC Advisory CPA… An independent review will ensure your claims are legitimate and accurately calculated, providing peace of mind…

Recent Crackdown on ERC Promoters and IRS’s Efforts

It’s important to note that there has been a recent crackdown on ERC promoters… The IRS has been increasing its efforts to curb ERTC fraud by issuing warnings against potential scams and fraudulent promoters. So, how can you avoid falling into these traps?

Well, your safest bet is to work with a reputable firm. One that adheres to the highest standards of integrity and transparency… A firm like JWC ERTC Advisory CPA…

Why Choose JWC ERTC Advisory CPA

So why should you choose us? Well, for starters, we understand the complexity of ERTC claims… We’re not just about getting you the maximum credit possible; we’re also about making sure your claims are accurate and defensible. And with the ongoing IRS crackdown on fraudulent ERTC claims, our commitment to doing things right has never been more critical…

We navigate the dimensions of fear, uncertainty and gain with you… With us, you gain an advisor who will thoroughly analyze your specific situation and provide customized solutions. You eliminate uncertainty by having professionals take care of complex calculations and compliance requirements. And most importantly, you overcome fear by ensuring your claims are valid, protecting you from potential IRS audits…

Consider taking your next step of discovery with JWC ERTC Advisory CPA… Together we can ensure your journey through claiming Employee Retention Tax Credit is a smooth one.

Jace W Campbell, CPA

Jace founded JWC ERTC Advisory CPA in March 2021 as the nation's first and only public accounting firm focused solely on ERC . . . and nothing else. He has personally signed over 9,000 ERTC claims and is proud to be executing these claims conservatively, and how intended by Congress.

He has a passion for educating clients so they can make the best decision for themselves.  If you read articles and watch videos that Jace produced in 2021, his approach is the same now as it was then.

While other firms pivot their messaging to comply with new IRS guidance, Jace continues preaching the same conservative principles that have helped clients recover hundreds of millions . . . while sleeping easy at night.

related posts:

Can You Claim Employee Retention Credit in 2023?

Can You Claim the Employee Retention Credit in 2022?

Employee Retention Credit Scams: What You Need to Know

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