Please note: As of 12:00 am PDT on April 9, 2024, we are no longer accepting applications for tax year 2020. Any completed applications (with supporting documentation) submitted on or after 12:00 am PDT on April 9, 2024, will be prepared and filed for tax year 2021 only. By continuing to utilize our service, you acknowledge and agree that SmartERC will not prepare nor file your Forms 941X for any quarter of tax year 2020.

ERC Claims in 2024: Top 4 Misconceptions

Top 4 Misconceptions

January 11, 2024

ERC Claims in 2024

Welcome to your guide on claiming the Employee Retention Credit (ERC) in 2024. We’ve noticed a lot of confusion and misinformation regarding this beneficial tax credit. 

My name’s Alejandra Astudillo from Smart ERC. For the past 13 years, I’ve dedicated my career to tax accounting, serving as an Internal Revenue Agent for the IRS. Now, I am working directly with Smart ERC to help businesses claim the maximum credit they qualify for. 

Our mission is to help ensure that you have the most accurate and up-to-date information to leverage these tax credits and support your business in 2024 and beyond. Let’s navigate the intricacies of the ERC together.

Top 4 ERC Misconceptions

Misconception 1: ERC Eligibility Confusion

Contrary to popular belief, the ERC is not exclusively limited to specific industries. The eligibility criteria for this tax credit are broad, allowing a wide range of businesses and industries to benefit from it.

Whether you’re in manufacturing, hospitality, or even non-profit work, you can potentially take advantage of this government stimulus program. 

Don’t let the myth of its limited applicability stop you from exploring the potential benefits that the ERC has to offer.

Here are some of the top myths about ERC eligibility:

Myth 1: Limited Eligibility 

One of the most prevalent misconceptions is that the ERC is only accessible to certain industries. In reality, the qualification criteria are much broader, meaning a vast range of businesses across many sectors can potentially benefit from this credit.

Myth 2: Excessive Complexity

Many business owners are under the impression that the process to claim the ERC is too complicated and time-consuming. However, with the right guidance and expertise, the process can be navigated efficiently, making the credit highly accessible for eligible small business owners.

Myth 3: Negative Impact on Other Tax Benefits  

Some businesses incorrectly believe that claiming the ERC will adversely impact their eligibility for other tax incentives. It is crucial to understand that the ERC can be claimed in conjunction with other tax benefits, and doing so does not necessarily jeopardize those other benefits.

Misconception 2: ERC Complexity and Accessibility

Many business owners are under the assumption that the ERC process is too complex to navigate. While the process does require a high level of understanding, it’s far from inaccessible for many small businesses. 

By seeking proper guidance, businesses can simplify the process, ensuring that they not only understand the ERC requirements but also maximize their potential credits for this beneficial program. 

The key lies in finding the right resources and expertise to navigate through the ERC process, ultimately making it manageable for any business, regardless of size or industry.

Here are some of the top myths about the complexity and accessibility of the ERC:

Myth 1: Extensive Documentation Required 

Another misconception is that claiming the ERC requires an overwhelming amount of documentation and paperwork. 

The reality is that while the claim does require certain documentation, it is typically information that a business should readily have as part of its regular financial and employee records.

Myth 2: Time-Consuming Procedure

Some businesses might be discouraged from claiming the ERC due to the notion that the process is too time-consuming. While it does require some effort and time, the potential financial benefits often far outweigh the time invested in the process. 

Efficient planning and proper guidance can considerably streamline the process, making it much less daunting than initially perceived.

Myth 3: Limited Duration and Availability 

A prevalent misunderstanding is that the ERC is only available for a limited time or has already expired. In reality, the Employee Retention Credit has been extended into 2021, and retroactive claims for previous years are possible. This offers businesses the opportunity to claim the credit for both current and past qualifying periods, thereby potentially increasing their overall financial benefits.

Misconception 3: ERC Impact on Other Tax Benefits

There is often a common misunderstanding about how the ERC interacts with other tax incentives. It is important to note that while there may be some interactions between different tax benefits, claiming the ERC does not automatically nullify your eligibility for other claims. 

Each tax incentive, including the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL), has its own specific criteria and requirements. It is possible to qualify for multiple incentives simultaneously. However, Yvette Davis, Senior Stakeholder Liaison with the Internal Revenue Service, does caution that “It’s important to keep in mind that there can be no double benefit for wages that are included in the computation of the Employee Retention Credit.”

To maximize your tax benefits and minimize any potential misunderstandings, carefully assess the specific rules and guidelines for each incentive by checking the ERC Frequently Asked Questions on the IRS website. Additionally, Smart ERC’s network of former IRS Auditors can help demystify the ERC qualification process so you don’t miss out on potential funds for your business.

Misconception 4: The Duration and Availability of ERC

The expiration and retroactive claim possibilities of the ERC are often misunderstood. It’s important to note that while the program spanned from March 12, 2020, to December 31, 2021, retroactive claims can be filed up to April 15, 2025. 

However, it’s important to note that to qualify for all quarters, retroactive claims must be filed before April 15, 2024.

Understanding these dates is key to maximizing its benefits and ensuring eligibility for any retroactive claims. By taking advantage of the ERC within this timeframe, businesses can potentially receive significant tax credits to help offset employment expenses and navigate the challenges brought by the COVID-19 pandemic.

Here are some of the top myths about the duration and availability of the ERC:

Myth 1: ERC is No Longer Available

Contrary to this belief, the ERC is available for qualified wages paid during the quarters of 2020 and 2021. The credit has not expired and remains a viable relief option for eligible businesses until April 14, 2025.

Myth 2: The IRS Moratorium Affects ERC Availability 

Some believe that the IRS moratorium on certain audit procedures impacted the availability of the ERC. This is not the case. The IRS moratorium primarily targeted issues related to examinations, not the eligibility or disbursal process of tax credits like the ERC. 

Myth 3: Delayed Claims Aren’t Possible 

Many businesses incorrectly believe that if they did not claim the ERC in their initial 2020 tax filings, they’ve missed the opportunity to do so. However, eligible businesses can file amended tax returns to claim the ERC retroactively for qualifying 2020 and 2021 quarters. This provides businesses with a valuable opportunity to recoup some costs incurred during the pandemic.

What Are the True Benefits of the ERC?

The ERC is a valuable resource that provides businesses with substantial financial assistance. It is crucial for businesses to not only understand the eligibility criteria but to also claim their rightful tax credits. 

By properly leveraging the impact of the ERC, businesses can experience a significant boost in their financial position and overall stability. This tax credit can serve as a lifeline, helping businesses navigate through challenging times and help ensure their long-term success and sustainability.

Benefit 1: Retain Employees and Mitigate Financial Instability

The ERC can be strategically utilized to support various activities within a small business, providing substantial financial relief. Primarily, the ERC can help businesses retain their employees during times of financial instability by offsetting a portion of the wage costs. This is especially beneficial for businesses experiencing a slump in sales or revenue due to unforeseen circumstances. Additionally, qualifying businesses can use their return to offer their employees competitive bonuses and other rewards that help them retain top talent.

Benefit 2: Support Operational Expenses and Adaptation

The ERC can provide a valuable lifeline to help your business finance operational expenses. This might include costs associated with adapting to new health and safety protocols, investing in new technology for remote work, or even funding marketing efforts to regain customer traction.

Benefit 3: Unlock Funds for Growth Initiatives

Refunds realized from filing for the ERC financial benefits can also free up funds for businesses to invest in growth initiatives. This might involve exploring new markets, launching new products or services, or enhancing customer service.

Benefit 4: Achieve Financial Flexibility for Business Success

The ERC can help businesses achieve financial flexibility. It offers a valuable opportunity to direct funds where they are most needed, enabling businesses to respond dynamically to business challenges while seizing new opportunities. 

Consequently, the ERC plays a vital role in not only sustaining businesses through tough times but also supporting their growth and success in the long term.

Expert Insights From a Former IRS Attorney

“There are numerous bad actors in the industry, making it crucial to choose a reliable team,” advises Mitchell Weller, Former IRS Attorney at Smart ERC. “Our team of former IRS Auditors brings expertise and integrity to guide you through the complex landscape of the ERC. We’ve gathered invaluable insights from our time working for the IRS and successful businesses who’ve claimed the ERC. Trust our team to help you navigate the process with ease.”

Staying informed about the ERC and consulting with our team of former IRS Auditors can make the process of claiming your credits much more manageable. Don’t let misconceptions deter you from leveraging this beneficial credit.

Remember, accurate information is your greatest ally in leveraging tax credits.

Why Trust Smart ERC with Your ERC Claim?

The ERC is a valuable resource that provides substantial financial assistance to businesses during challenging times. It’s crucial to address the misconceptions surrounding ERC:

  • While the ERC does interact with other tax incentives, it does not automatically nullify your eligibility if you benefited from other programs.
  • The ERC has not expired, and you can file retroactive claims until April 15, 2025.

 

When the IRS resumes processing, our expert network will handle all aspects of your ERC claim, providing you with a service that fulfills Forbes’ extensive criteria for selecting an ERC professional:

  1. Thorough documentation demonstrating your ERC eligibility
  2. Comprehensive government order research to support your claim
  3. Over two decades of experience and thousands of satisfied clients
  4. No upfront fee to see if you qualify

 

When you partner with Smart ERC, you can also benefit from an optional ERC audit defense for the peace of mind you deserve. With our network at Smart ERC on your side, you can be confident that your claim is in highly qualified hands.

 

Having served as an IRS Auditor for over 13 years, I have acquired a deep understanding of the tax-related challenges that business owners encounter. My primary goal is to ensure that we deliver accurate and dependable information. We aim to provide you with peace of mind as we expertly guide you through the entire process.”

– Alejandra Astudillo, Former IRS Auditor

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