If your business hasn’t yet taken advantage of this substantial tax credit, you still have a short window of opportunity to act.
The ERC, which was introduced as part of pandemic relief efforts, can provide up to $21,000 per employee for qualified businesses. But the clock is ticking—the deadline to amend your payroll tax returns is April 15, 2025 (right around the corner).
Here’s what you need to know.
What Is the ERC?
The Employee Retention Credit is a refundable tax credit designed to help businesses that kept employees on their payroll during challenging economic periods caused by the COVID-19 pandemic.
For the 2021 tax year, eligible businesses can claim up to $7,000 per employee per quarter for the first three quarters of the year, totaling $21,000 per employee. (If you have 10 qualifying employees, you are looking at $210,000.)
What Businesses Qualify?
To qualify for the 2021 ERC, your business must meet specific criteria:
Significant Decline in Gross Receipts, or Full or Partial Suspension of Operations
Your business has one of two ways to qualify:
Size of the Business
For 2021, businesses with 500 or fewer full-time employees can claim the ERC for wages paid to all employees. Larger employers can only claim the credit for wages paid to employees who were not working.
New Business Started After February 15, 2020
If you started a new business after February 15, 2020, you could qualify for credit of up to $100,000.
Why Amend Your Payroll Tax Returns Now?
The ERC is claimed through Form 941, the Employer’s Quarterly Federal Tax Return.
If your business missed claiming the credit during 2021, you can still amend those returns by filing Form 941-X for the applicable quarters.
The statute of limitations for amending returns is generally three years from the original filing deadline. Because of the way payroll returns work, this means you must file your 2021 amended payroll returns on or before April 15, 2025. Time is short; you have to hop on this if you are going to do it.
What’s at Stake?
The ERC can provide a significant financial boost to your business. For example, if your business qualifies and employs 10 eligible workers, you could receive up to $210,000 in refundable tax credits for 2021. These funds can be used to cover operating expenses, invest in growth, or address other financial challenges.
Common Misconceptions
Many businesses have overlooked the ERC due to confusion about eligibility or because they initially believed they did not qualify. Some common misconceptions include:
Next Steps
If you think your business might qualify for the ERC, here’s what you should do:
Takeaways
Time is running out to claim the 2021 ERC. If you are going to claim it, you need to amend your payroll tax returns on or before April 15, 2025.
Eligible businesses can claim up to $21,000 per employee. With 10 employees, you are looking at up to $210,000.
To qualify, your business must be a small business with 500 or fewer full-time employees (larger businesses can qualify but only for wages paid to employees who weren’t working). Your business also must have
Don’t let misconceptions—such as that PPP loan recipients can’t qualify or that the process is too complex—deter you.
If you started a new business after February 15, 2020, you could qualify for credit of up to $100,000.
If your business qualifies and hasn’t yet claimed the ERC, act now!
