The Employee Retention Credit (ERC) is a refundable tax credit benefitting small to mid-sized businesses who are suffering from the impact of COVID-19 restrictions and regulations. This tax credit helps businesses by providing a refundable credit amount for qualified wages paid to employees. The amount you are approved for is determined by the number of employees that you paid qualified wages to.
ERC provides significant relief to businesses as they rebuild their business operations and grow revenue in a post-COVID world. If your business qualifies for the Employee Retention Credit, you will need to apply by the IRS’ specified date for the tax year you are applying. However, it is best not to wait until the deadline to apply. Businesses who apply now with a reputable ERC consultant like Five Star ERC Experts, who are experienced certified tax consultants and tax attorneys, will get you in line with the IRS faster to receive refundable tax credit quicker.
What Time Period Does the Employee Retention Credit Apply to?
The Employee Retention Credit applies between March 13, 2020 and December 31, 2021. However, the rules for this time period vary between 2020 and 2021. For example, not all businesses who qualify for ERC in 2021 qualify in 2020. In addition, not all businesses who qualify in the first two quarters of 2021 qualify for the last two quarters of 2021. To determine your business’ eligibility, consult with an experienced ERC specialist certified as either tax accountant or tax attorney.
If you do not fully qualify for the time period that you are applying for, the IRS could audit your application for false claims.
ERC Deadline for 2020
The ERC deadline for the 2020 tax year is April 15, 2024. All businesses who qualify need to apply before this deadline. The IRS will not accept late applications for any reason that are submitted beyond April 15th. To apply, businesses will need to amend their 2020 tax return and apply based on qualified wages paid between March 12, 2020 and January 1, 2021.
The amount you receive from your refundable credit can help you pay business expenses and pay salaries and benefits to employees. It can also help you recover faster from the losses you may have sustained during the COVID-19 pandemic.
ERC Deadline for 2021
The ERC deadline for the 2021 tax year is April 15, 2025. Unlike the 2020 tax year, businesses will need to apply per qualifying quarter of the calendar year. Not all businesses will qualify for all quarters of 2021. The American Rescue Plan only extended the ERC deadline for recovery startup businesses to apply during quarters three and four of 2021.
Although the ERC deadline for the 2021 tax year is not until 2025, you should not wait to apply for your tax credit. The waiting period for receiving your ERC tax credit could be months. If your business is in need of financial relief from the pandemic, applying sooner could mean receiving that relief faster.
Is There a Statute of Limitations for ERC?
A statute of limitations sets a legal limit to how long you have to file legal proceedings. Statute of limitations vary depending on their purpose. In terms of ERC, the statute of limitations does not vary from business to business. All businesses must apply by the April 15, 2024 deadline for the 2020 tax year and April 15, 2025 deadline for the 2021 tax year.
The IRS will not accept applications submitted after the deadline. Applying at the last minute could also mean waiting even longer for approval. Businesses who apply as soon as possible with an ERC consultant will get in line with the IRS faster to receive refundable tax credit quicker.
ERC IRS Audits Period
If you apply for the ERC with incorrect information or do not fully qualify, the IRS could audit your business for false claims. By hiring an experienced ERC consultant from Five Star ERC Experts, you will avoid a potential IRS audit for false claims. There are plenty of ERC scams where uncertified ERC consultants try to submit applications for businesses who do not qualify. These scammers often require hefty upfront fees for their services. Five Star ERC Experts will never charge upfront fees for services. Our team consists of certified tax attorneys and tax accountants well versed in navigating the IRS.
There is no hard deadline for when the IRS can audit a claim by. If you apply for the IRS through an ERC mill or provide false information, you may not get audited right away. It can sometimes take years for the IRS to audit claims. However, the IRS has already issued warnings about ERC mills trying to submit applications for businesses that do not qualify.
If you are unsure if you qualify for the ERC tax credit, consult with our experienced team of ERC specialists or use our ERC calculator to determine what you could earn upon approval.