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The Timeframe For The ERC

Business Litigation Lawyer
/27 Jan 2024
/By admin

Is There Still Time To Apply For The Employee Retention Credit (ERC)?

The Employee Retention Credit (ERC) was developed to soften the economic blow delivered by the COVID-19 pandemic. Due to the overwhelming (2.6 million claims as of July) and often fraud-filled response, the IRS stopped reviewing applications through the end of 2023, though you can still apply for the credit.

What Is The ERC?

The ERC was part of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, which passed Congress in March 2020. Employers can seek relief for maintaining employees during 2020 and 2021. This isn’t a loan. It’s a refundable payroll tax credit, so there are no repayments. A lawyer, like a business litigation lawyer from a law firm such as Focus Law LA can tell you that though the ERC expired in September 2021, businesses can file retroactive claims until April 15, 2024 (for 2020 claims) and April 15, 2025 (for 2021 claims). You can correct your past application by filing IRS Form 941-X for eligible quarters if you meet the given deadlines.

Can My Business Get This Tax Credit?

You may qualify for it if you can show:

  • A significant decline in your gross receipts in a calendar quarter compared to the same quarter in 2019. This is an objective and straightforward calculation for eligibility 
  • You fully or partially shut down due to a government order. You may have been approached or used a service to help you qualify for this more subjective approach. They may be very aggressive with questionable legal positions to help employers qualify. This may subject your application to an audit. These types of applications caused the IRS to stop processing new claims while they examine existing ones

If you plan to seek the credit due to a government shutdown, consult an accountant or attorney with expertise in this area, not on a service that charges a percentage of your expected credit.

Using a government order to justify a credit may cause problems because it may be tough to document for businesses considered “essential” during the pandemic, and employers must show a clear link from a government order to a negative operational impact. Your business must have suffered a “more than a nominal impact” due to the government order. This may be difficult to prove, but it hasn’t stopped many from trying.

The IRS will look closely at how you demonstrate how your company was affected by a government order. You won’t get the credit by providing a vague narrative lacking detail. The fact that you saw a drop in customer demand won’t be enough. 

Fraudulent Applications Clog The Tax Credit Pipeline

The IRS stated on September 14 that they started a moratorium on processing new applications, and it’s supposed to conclude by the end of December. Their press release states:

“IRS Commissioner Danny Werfel ordered the immediate moratorium…following growing concerns inside the tax agency, from tax professionals as well as media reports that a substantial share of new claims from the…program are ineligible and increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing.”

The agency announced in July it was shifting its focus to reviewing claims for compliance concerns, intensifying its audit work and criminal investigations on promoters and businesses filing false claims. They claimed hundreds of criminal cases were being considered, with thousands more applications being referred for audits. 

If you are interested in seeking this credit or have questions about it, consult with an accountant or attorney you can trust to guide you through this process.