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4 Tips To Ensure Your ERC Application Is Approved

The Employee Retention Credit (ERC) — also known as the Employee Retention Tax Credit (ERTC) — was created to help small and medium-sized businesses like yours overcome the COVID-19 hardships in the form of significant payroll tax refunds. But, how do you get that money?

With multiple changes and amendments to the legislation surrounding the ERC, the application process is complicated. Even if your business qualifies, your application could be denied if there are errors or missing information.

It’s time to get your ducks in a row so you can get the money your business deserves. Here are four tips to make sure your ERC application is approved the first time around.

1. Prequalify for the Employee Retention Tax Credit

Before you start your payroll tax refund journey, make sure you’re eligible. The qualifications for the 2020 ERC and the 2021 ERC are slightly different, so before you get started, first check both sets of guidelines to see if you qualify for one (or both!) of them.

2020 ERC Qualifications

  • You had a maximum of 100 employees on your payroll in 2019.
  • You kept employees on your payroll.
  • Your business suffered during the pandemic:
  • Your business was forced to shut down due to a government order for any quarter of 2020.
  • Your revenue was decreased by 50% or more for any 2020 quarter when compared to the same quarter of 2019.

2021 ERC Qualifications

  • You had between 5 and 500 employees on your payroll in 2019.
  • You kept employees on your payroll.
  • Your business suffered during the pandemic:
  • Your business was forced to shut down due to a government order for any quarter of 2021.
  • Your revenue was decreased by 20% or more for any 2021 quarter when compared to the same quarter of 2019.

For both years, you may also qualify if your business had canceled travel plans, meetings were impacted, or your suppliers had issues in their supply chain due to the pandemic.

You could earn a refund of up to $5,000 per employee for 2020 and up to $7,000 per employee per quarter for the first three quarters of 2021 that you kept on your payroll.

2. Ensure All Paperwork for Your ERC Refund Is Prepared

Besides your payroll and business revenue information, you’ll need to fill out forms with accuracy to ensure a smooth process.  Form 7200 was used to claim the refund in advance, but it is no longer in use. Check with your ERC expert to understand what is required for the process.

According to the IRS, common errors when filing include:

  • Missing or inaccurate Employer Identification Number (EIN).
  • Checking more than one box for various sections.
  • Incomplete sections.
  • Incorrect monetary calculations.
  • Unsigned forms.

Because of the complexity of the legislation, your CPA may have challenges or questions about the ERC when preparing the paperwork, especially if they are not specifically experienced with the employee retention tax credit process.

3.  Work With an ERC Expert

An ERC expert is a tax professional who has first-hand experience with the Employee Retention Credit legislation. This is key to verifying that you’re qualified and getting your refund the first time you apply — without issues. Although you could use your CPA, they may not be well-versed with the ERC, especially since it has undergone many changes and updates.

An ERC expert will:

  • Determine quickly if you’re eligible for one or both ERC years.
  • Quantify your refund so you know how much money to expect back.
  • Qualify your refund application so you get your money.

4. Have Your ERC Application Submitted ASAP

You’ll want to apply now ​​to make sure you get the ERC refund since the period to apply is set to end, just like it did with the Payroll Protection Program (PPP). Additionally, other situations could occur that could negatively impact your chance of getting the ERC.

For example, the limited funds could run out, potentially resulting in a zero refund if you apply after everyone else. What’s more, the government could decide to end the program even earlier than planned — in fact, they already did this once with the Infrastructure Bill. Most small businesses can now only qualify for the first three quarters of 2021 instead of all four quarters as originally stated.

Missing out on this money is way worse than accidentally throwing your $5 lottery ticket in the trash (which is still a bummer!). With potentially hundreds of thousands of dollars on the line, it’s crucial to get your ERC application completed and submitted now.

Make Sure You’re Qualified

Spend a little time to see if you, like many other business owners, can get cash back into your wallet. Getting qualified is easy, and only takes about twelve minutes to fill out the form. You’ll get a free estimate of your potential refund, and there is no money due up front.

Even if you don’t think your business qualifies — or even if your CPA says you won’t — you should give it a shot, because over 90% of businesses qualify for the payroll tax credit!

Your ERC application doesn’t have to be a headache. Innovation Refunds is here to help you get money back into your business.

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