Businesses Can File for Retroactive ERC Until 2025

The CARES Act of 2020 established the employee retention credit (ERC or ERTC) to provide businesses with much-needed relief from the financial hardships of the COVID-19 pandemic.
 
For various reasons, many companies did not file for the credit on their 2021 and 2022 tax returns. The Infrastructure Investment and Jobs Act (IIJA) retroactively ended the ERC program as of September 30, 2021, for all businesses (excluding recovery startup businesses, which remain eligible through December 2021).
 
However, the IRS still has funds for this credit and allows companies to amend their tax returns and claim the ERC retroactively. Following are some common employee retention credit FAQs and additional information about the credit that is still available for a limited time.

Can Companies Can Still Apply for the Employee Retention Credit?

The ERC stimulus funds are still available, and small and mid-size businesses should apply. The IRS has an imposed statute of limitations, driven by the three-year window in which it allows amendments for previously filed tax returns.
 
To amend a return filed for the 2020 tax year, companies have until April 15, 2024. To file an amended return for ERC refunds for the tax year 2021 is April 15, 2025.
 
For many companies filing for ERC credit, the ERC refunds exceed the payroll taxes paid by employers. The tax credit amount may also exceed the amount of money a company receives from a PPP loan.

How Long Does It Take for the IRS to Provide a Refund After Filing an Amended Form 941X?

Generally speaking, the IRS ERC processing time takes about nine months to get the amended return reviewed and provide ERC refunds. Form 941 is the IRS form that employers file each quarter to report the various taxes withheld from employee paychecks.
 
To receive the ERTC tax credit, companies must go through the steps to complete their application and then file an amended payroll tax return using form 941X.

Can a Business Accept Money from Both the ERC and PPP Loans?

If a company received a PPP loan, it was allowed to use that money for other business expenses aside from payroll costs. Any PPP money used to fund wages must be excluded from the ERC wage calculation when applying for the ERC.
 
However, the PPP funds only applied to wages paid out over an eight to 10-week period, so the impact could be minimal. An application for the ERC stimulus requires documentation of wages paid, among other information. The company’s work paper support can show the PPP funds allocated across the 24 weeks covered by the ERC.
 
Additionally, wages for owners of the company or wages paid in excess of $10,000 per employee in any single credit-generating period can be allocated to PPP since these wages would not have generated any ERC credit, to begin with.

If a Business Uses a PEO Instead of a Traditional Payroll Tax Provider, Can It Still Claim the ERC?

Some companies outsource their payroll function to a PEO (Professional Employer Organization). This full-service business typically handles all of a company’s payroll and benefits administration.
 
Regardless of who does the work of filing a company’s payroll tax returns, the company is still entitled to amend its 941 payroll tax filings and receive its retroactive ERC credit.



Can Churches and Other Religious Organizations Qualify for the ERC?

During the pandemic, churches and other religious organizations were under a government mandate to maintain certain restrictions on capacity. This restriction on gatherings and other effects of the pandemic most likely caused a significant qualifier for ERC revenue reduction or decline in gross receipts, making these organizations eligible for ERC refunds.

What are Considered Gross Receipts for the ERTC Tax Credit?

For the ERTC application, gross receipts fall into the following categories, which differ for taxable vs. non-taxable entities.
 
Gross Receipts for Taxable Entities:

• Total sales for goods and services, net of returns and allowances
• Income from investments (rents, interest, dividends)
• Business income from annuities or royalties (regardless of whether the income stems from the company’s core trade or business)
• Forgiven PPP loans are not considered gross receipts for the ERC calculation
   

Note: Income recognition is based on the tax accounting method. Gross receipts will be reduced by the business taxpayer’s adjusted basis for certain business property or sales of capital assets.
 
Gross Receipts for Non-Taxable Entities:

• Includes all gross receipts for the given tax year, which generally includes all the non-taxable entity’s receipts
• Any proceeds from grants and investments

Note: Income recognition is based on the tax accounting method. Gross receipts will NOT be reduced by the business taxpayer’s adjusted basis for certain business property or sales of capital assets.

What Are ERC Qualified Wages?

Generally speaking, the ERC credit report amount is calculated based on the amount of qualified wages a company paid that were subjected to FICA or group health care expenses. These wages must have been paid during the calendar quarters when the company suspended business or suffered a significant ERC revenue reduction.
 
Some payments made for healthcare expenses also qualify. The IRS has additional detail on the specifics of what it considers to be qualifying wages.

Calculate Your Credit Correctly to Ensure You Get Your ERC Funds

Calculating the qualified wages and other relevant details can be daunting, especially if your business has any gray areas, such as 1099 staff or employees operating outside of the U.S. during the pandemic.
 
To ensure that your company receives the ERC money it’s qualified for, you need to consult with experts who have prepared hundreds of ERC applications, seen a myriad of different scenarios, and kept up to date on the latest IRS changes and clarifications. To get your ERC claim filed correctly and efficiently, don’t wait. The IRS could take up to one year to process your application. Get started now and contact us today.