There are many people who are concerned about how long it will take for their ERTC refund to come through. It can be a confusing and frustrating experience, so knowing what to expect can be helpful.
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Employee retention tax credit
Employee Retention Tax Credit, or ERC, is a Federal tax credit program that rewards businesses for keeping employees on their payroll. The credit is based on the total wages paid to eligible employees.
The credit is designed to help businesses that are experiencing economic hardship. If your business was unable to pay employees during the COVID-19 pandemic, you may be eligible for the ERTC. Depending on your situation, you may be able to claim up to $26,000 in credit each year. Currently, the maximum amount of credit that can be claimed is $10,000 per employee.
To receive the credit, you must file an amended Form 941-X. You can find more information on the IRS website. It is recommended that you consult an accountant or certified public accountant before filing.
According to the IRS, it can take up to six months to process an Employee Retention Tax Credit refund. The IRS is working to reduce the time it takes to process returns. However, if you are seeking a refund that is larger than $1 million, additional examination may be necessary.
For businesses that do not qualify, they can file an amended return within three years of the date that the taxes were paid. Employers using PEO or CPEO do not file an individual Form 941, but report the credit on the PEO aggregate Form 941.
However, if your business did not claim the Employee Retention Tax Credit, it can do so retroactively. In order to do so, the employer must have a valid business shutdown during the applicable tax period. They must also prove that they paid their qualified wages for at least one quarter.
If you are uncertain if your business qualifies for the ERTC, you can use the ERC Assistant to get a general idea of your credit. However, it is not a substitute for legal advice.
You may also need to speak with an attorney to understand your options. Although there are a number of ways to contact the IRS, the IRS only has a limited number of agents. Therefore, it is important to call by 8:00 a.m. ET to avoid waiting.
Check the status of your ERC refund
If you have claimed an ERC refund, you may have heard about the backlog of unprocessed returns. As of April 2022, the IRS reported that 23.5 million paper returns have not been processed. This number is expected to increase by more than 8 million by the end of 2020. The backlog is causing delays in ERC payments and relief checks for charities and small businesses.
There are some steps you can take to minimize the wait. One is to file the correct ERC claim. Another is to seek advice. It is important to know that there are penalties involved if you don’t claim an ERC in the right way.
Some businesses have been left waiting for weeks and even months for their ERC refund. This could put them at a financial disadvantage.
Fortunately, the IRS offers a tool to track your ERC refund. However, the tool does not work over the phone. You can check the status of your ERC refund by calling the IRS customer service number or visiting the IRS website.
Unfortunately, the tool is only available four weeks after the paper return was mailed. Even then, you may not be able to find out the exact status of your ERC.
In addition, the tool may not be the best option for tracking your ERC. The best way to check your ERC is to consult a tax professional. These professionals can offer tips on how to claim an ERC refund in the right manner. They will be able to help you resolve minor issues and provide you with additional information.
While the IRS has made strides in the area of online tracking, there are many reasons why the agency is still not offering timely results. Delays in ERC payments are a result of several factors, including a shortage of qualified IRS staff. Other problems include a global pandemic and labor issues.
Until the problems associated with the ERC subside, some taxpayers will have to wait for up to 12 months before they get their ERC refund. If you are one of the unfortunate few, you should follow up on your delayed payment.
Loan forgiveness requires “double dipping”
When the Employee Retention Tax Credit (ERTC) was first introduced, there was not much guidance from the IRS on its eligibility or how to claim it. The Consolidated Appropriations Act (CAA) changed that, increasing the pool of potential claimants and expanding the time frame for claims. It also changed rules for qualifying businesses. However, there remain some unanswered questions about the rules.
For example, how should a business with a PPP loan determine when the best time to claim the ERTC is? This question is more complex than for other payroll tax benefits.
Currently, the rules for both the PPP and ERTC involve a so-called “double dipping” prohibition. Double dipping is the act of using the same wages for both a PPP loan forgiveness application and an ERTC credit.
This is a significant, unresolved issue. Several organizations have had to make adjustments to their original loans. Some lenders are even re-testing their initial loans.
According to the Consolidated Appropriations Act, a business cannot claim both PPP and ERTC on the same funds. As a result, the IRS has provided some clarifications regarding the eligibility requirements for each.
Another rule is that a business cannot claim a payroll expense twice. For example, let’s say an employer paid $200,000 of payroll costs in 2020 and claimed $70,000 of non-payroll expenses in a PPP loan forgiveness application. In this case, the employer made an election to not include the other $80,000 in non-payroll costs.
A similar rule applies to a business that receives a second draw from the Paycheck Protection Program. While this isn’t a direct rule, the IRS has made it clear that it is not advisable for a business to elect to include more payroll costs in its ERTC claim than it is eligible to.
Moreover, an employer must apply a safe harbor consistently across all entities. This means that an employer should consider maintaining payroll credits for at least six years.
Finally, employers must be prepared to retain documents related to employee sick leave for four years. These documents can be used to substantiate an ERTC. They should also be included in a PPP loan forgiveness application.
Legislation to bring ERTC back for Q4
A bipartisan group of House members have been working to restore ERTC for the fourth quarter of 2021. They believe that this legislation is crucial to helping small businesses recover from the economic impact of the COVID-19 pandemic.
This tax credit was designed to help small businesses keep and rehire employees. However, usage has decreased. As revenues have recovered from the pandemic, ERC use has dropped, too.
During the fourth quarter of 2021, a few businesses were still able to claim ERTC, but the majority of companies could no longer get the tax credit. In the past, most employers have been able to use ERTC for one calendar quarter. Despite this, a number of small businesses have continued to take advantage of the credit through the end of the year.
Some small businesses are now facing retroactive tax increases as a result of delayed refunds. It may also turn a cash crunch into a cash crisis, as operators who do not receive ERTC refunds cannot take payroll deductions.
To address this problem, Synergi has been working with Congress to re-enact ERTC for the fourth quarter of 2021. Legislation to do so has been introduced by Senators Ben Cardin (D-MD) and Maggie Hassan (D-NY), as well as Representatives Carol Miller (R-WV), Stephanie Murphy (D-FL), and Kevin Hern (R-FL).
The IRS has issued a rule that says that companies that pay more than $100,000 in payroll taxes will have to pay the government withheld taxes from their Q4 payroll tax returns. However, they can also keep their payroll taxes as credit advancement for their business operations.
However, many operators who assumed that ERTC would remain in place were surprised by a sudden tax “claw back” when they filed. Due to the delays in the processing of ERTC claims, the IRS may have deferred some of the refunds, making this possible.
Whether you are a business that has taken advantage of ERTC, or a business that is unsure about how it works, it is important to know your options. While Congress has enacted an emergency relief package to help those in need, it will be up to you to decide what is best for your company.
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