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IRS Plans On Targeting Abusive ERTC Claims

Have you encountered those intriguing ads whispering about a generous Employee Retention Tax Credit (ERTC)? Well, the whispers are true! This government-backed program, established during the COVID-19 pandemic, rewards businesses like yours for retaining employees through 2020 and 2021. But wait, there’s more! Even though the program officially ended in September 2021, unclaimed ERTC still awaits eligible businesses willing to amend their payroll tax returns.

But before you get swept away by the allure of tax relief, let’s demystify the ERTC eligibility and navigate the claim process smoothly. This article is your ultimate guide to unlocking the potential of this valuable credit.

Who’s Eligible for the ERTC Party?

The good news is, size doesn’t matter! Whether you’re a bustling enterprise or a cozy startup, the ERTC welcomes all employers, except state and local governments. Tax-exempt organizations, tribal businesses, and even those operating in U.S. territories can join the fun. The party extends to wages paid between March 13, 2020, and September 30, 2021, and for certain startups, an extension runs through December 31, 2021.

Two Paths to Eligibility: Choose Your Adventure!

  1. Business Operations Curtailed: Did government restrictions put your business on hold or limit its capacity due to COVID-19? You might be eligible! This applies whether you were fully or partially suspended during any quarter in 2020 or specific quarters in 2021.
  2. Significant Decline in Gross Receipts: Did your quarterly revenue in 2020 plummet to 50% or less compared to the same quarter in 2019? You’re in the club! This eligibility window closes when your quarterly revenue climbs back above 80% of the comparable 2019 quarter. For 2021, the bar is set at 20% decline, with an option to compare the previous quarter’s revenue instead.

How Much Can You Claim? Buckle Up for Big Numbers!

The ERTC is a refundable payroll tax credit, meaning it directly reduces your tax liability. Here’s the breakdown:

  • 2020: 50% of qualified wages, capped at $10,000 per employee, translates to a maximum credit of $5,000 per employee.
  • 2021: Buckle up for a bigger haul! You can claim 70% of qualified wages, capped at $10,000 per employee per quarter. That translates to a whopping $7,000 credit per employee for each quarter in 2021 (quarters 1, 2, and 3). However, for “recovery startup businesses” (generally, those established after February 15, 2020, with average annual gross receipts below $1 million), the maximum credit is capped at $50,000 each in quarters 3 and 4 of 2021.

Caution Ahead: Navigate the Bumps Smoothly!

While the ERTC promises sweet rewards, a few cautionary notes are essential:

  • No Double Dipping: If you received a forgivable PPP loan for the same wages, you can’t claim the ERTC on those wages. Think of it as “one bite per sandwich.”
  • Work Opportunity Credit Conflict: You can’t claim the ERTC for any employee you already claimed the Work Opportunity Credit for during the same period.
  • Beware of the Hype: Sadly, some unscrupulous actors exploit the ERTC program. Be wary of claims solely based on government shutdowns, especially supplier shutdowns.

Ready to Claim Your ERTC Treasure? Let’s Unearth It Together!

If you suspect your business might be eligible for the ERTC, don’t delay! Our team of experts is here to guide you through the claim process and ensure you maximize your potential credit. Contact us today and let’s turn unclaimed ERTC into your business’s financial victory!

JS Morlu LLC is a top-tier accounting firm based in Woodbridge, Virginia, with a team of highly experienced and qualified CPAs and business advisors. We are dedicated to providing comprehensive accounting, tax, and business advisory services to clients throughout the Washington, D.C. Metro Area and the surrounding regions. With over a decade of experience, we have cultivated a deep understanding of our clients’ needs and aspirations. We recognize that our clients seek more than just value-added accounting services; they seek a trusted partner who can guide them towards achieving their business goals and personal financial well-being.
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