Refundable vs Nonrefundable: What is the difference for ERTC? 

 October 6, 2023

By  Jace W Campbell, CPA

Refundable vs Nonrefundable

The Employee Retention Tax Credit (ERTC) is an essential tool for businesses navigating the financial turbulence brought about by extraordinary circumstances, such as the COVID-19 pandemic. Designed to incentivize employers to retain their workforce during these challenging times, this refundable tax credit offers significant financial relief…

But what exactly does it mean when we say that this tax credit is refundable?… And why is it crucial for business owners and operators to fully understand this aspect of the ERTC program?

What Makes a Tax Credit “Refundable”?

When we talk about tax credits, it’s important to distinguish between refundable and non-refundable ones. A refundable tax credit differs significantly from a non-refundable one in how it impacts your tax obligations.

If you have a non-refundable tax credit, its value can only decrease your owed taxes down to zero… However, if you have a refundable tax credit – like the ERTC – its value can reduce your owed taxes down to zero, and then if there’s any remaining credit value, that amount is refunded back to you.

This key characteristic makes the ERTC especially beneficial for businesses…

Also read: Is the Employee Retention Credit a Grant?

How Can Businesses Benefit From The ERTC?

For businesses that qualify for the ERTC, this refundability feature can be tremendously advantageous… It not only reduces their total taxable income but can also result in substantial cash back from the government.

Consider a scenario where a company owes 20,000 in taxes but has an ERTC worth 25,000… The first 20,000 of that ERTC would cover their entire tax bill. But what happens to that extra 5,000? Because the ERTC is refundable, this company would receive that remaining $5,000 as a refund.

This type of financial relief can significantly bolster a company’s cash flow, especially in challenging economic conditions…

Navigating the ERTC with Professional Help

With its numerous requirements and qualifications, applying for and receiving the ERTC can be a complicated process… However, professional help – such as that provided by JWC ERTC Advisory CPA – can greatly simplify this procedure.

By working with an experienced advisor who understands the intricacies of the ERTC, businesses can navigate this tax landscape confidently… With professional guidance, businesses not only maximize their potential ERTC benefits but also ensure they’re complying with all relevant regulations.

Also read: How Do I Check the Status of My ERC Refund?

Recent Crackdowns on ERC Fraud

Recent crackdowns by the IRS on fraudulent ERC claims highlight the importance of ensuring your business meets all eligibility requirements before applying for these credits…

In response to rising cases of fraud, the IRS has stepped up its auditing efforts. Firms found guilty of fraudulent practices face hefty penalties and potential legal ramifications… This recent development underscores why it’s more important than ever to understand fully and comply with all aspects of the ERC program.

Why Choose JWC ERTC Advisory?

In light of these increased audit activities and heightened scrutiny, enlisting professional help makes even more sense. Choosing a reputable firm like JWC ERTC Advisory CPA ensures your business is guided by experts who stay abreast of changing regulations and compliance requirements…

Moreover, our services go beyond just securing your credit. We provide a comprehensive eligibility review for taxpayers who have previously filed for the ERTC but may have questions or doubts about their claims.

Final Thoughts

Understanding that the Employee Retention Credit is refundable provides businesses with crucial insight into how they can leverage this program to mitigate financial stress during challenging times. With professional guidance from JWC ERTC Advisory CPA, navigating this complex tax landscape becomes less daunting, enabling businesses to maximize their benefits while maintaining full compliance.

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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