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Recent headlines have highlighted confusion around the Employee Retention Tax Credit (ERTC), mainly due to fraudulent claims driven by deceitful promoters. This prompted the IRS to enhance its oversight. Additionally, proposed legislation on the horizon could introduce an earlier filing deadline for claims.

Despite these challenges, the ERTC is still available for 2021, and employers that have yet to assess their eligibility might miss out on significant financial benefits.

Why You Should Act Now

The ERTC can provide a significant financial boost — for 2021, up to $21,000 per employee for eligible employers. However, many employers mistakenly believe it's too late to claim the credit. While the program technically ended in 2021, you still have time to claim this credit for that year if your company is eligible.  

The proposed legislation would retroactively end the ERTC program early for filings made after Jan. 31, 2024. Although that legislation passed overwhelmingly in the House of Representatives earlier this year, its fate remains uncertain as support in the Senate presently is not sufficient. It is not possible to know whether or when this legislation may become law, but the threat of this early termination date (at least in its present form) would seem to weaken as time passes. Employers should pursue valid ERTC claims as quickly as possible in the event a different termination date eventually becomes law.

The current deadline to claim your 2021 ERTC is April 15, 2025. The IRS is facing a massive backlog of these claims (including 2020 ERTC claims filed by the April 15, 2024 deadline) and is ramping up its review process. The longer you delay, the longer you may wait for your refund. 

Are You Eligible for the ERTC?

If your company was impacted by the COVID-19 pandemic in 2021, you might qualify for the ERTC.

Eligibility criteria include:

• A significant decline in your company’s 2021 gross receipts compared to your 2019 gross receipts;
• Government COVID-19 orders specifically affecting your ability to conduct operations in 2021; or
• During the third and fourth quarters of 2021, meeting the definition of a “recovery startup business” (this is uncommon).

Don't DIY Your ERTC Claim

The ERTC is a complex benefit with precise documentation requirements.  The governmental shutdown order criterion has been especially problematic and has been misused and misinterpreted by unsavory promotors.  Filing incorrect or incomplete claims can lead to audits and delays. It’s imperative to obtain expert help to maximize your credit while establishing the necessary documentation to ensure the validity of your claim and avoid costly penalties.

The ERTC's intricacies, especially when considering its interaction with other tax credits and relief measures, underscore the importance of a strategic approach. Your decisions regarding the ERTC can influence other financial aspects of your company, so making informed, holistic decisions is crucial.

Engaging with tax professionals can demystify the complexities of the ERTC, ensuring that your company maximizes this opportunity while maintaining compliance.

Finally, it is still possible for Congress to pass a law retroactively ending taxpayers’ ability to file 2021 ERTC claims after Jan. 31, 2024. This is all the more reason to have a knowledgeable advisor explain the opportunities and potential traps to you.

Next Steps

Employers exploring a 2021 ERTC claim presently have until April 15, 2025, to file, but earlier filing is highly recommended because Congress could retroactively accelerate that deadline. Determining eligibility for the ERTC demands a detailed examination of your unique situation. For tailored advice and support, we invite you to connect with our team today.

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