Navigating the intricate world of taxes can be intimidating for any business owner. The Employee Retention Credit (ERC), in particular, presents a unique set of challenges, and the stakes are high. Concerns about audits and potential fund return requirements from the Internal Revenue Service (IRS) can keep entrepreneurs awake at night. However, failing to explore the ERC can mean missing out on significant financial opportunities, with the potential to receive up to $26,000 per qualifying employee. In this article, we’ll highlight six common mistakes businesses should avoid when claiming the ERC, ensuring a smoother journey to tapping into this valuable resource.
1. Estimating Your Potential Credit Amount
One of the most frequent mistakes is hastily estimating the ERC’s potential value. While headlines tout figures like $26,000 per qualifying employee, the reality is more complex. The calculation involves various factors, and it’s essential to consult tax specialists, such as my expertise, to help you navigate the intricacies of the ERC and maximize your credit while minimizing risk.
2. Disqualifying Your Business Without Professional Guidance
Many business owners should have more time to disqualify themselves from ERC benefits. Since the program’s inception, it has undergone multiple modifications, expanding its reach. Even if your business started operations after the beginning of 2020, you may still be eligible. Consider potential financial support; consult our experienced tax specialists to explore your eligibility.
3. Lacking Awareness of Local Government’s Pandemic Orders
Understanding the impact of the COVID-19 pandemic on your business is a critical aspect of ERC qualification. This requires knowledge of your local government’s ever-evolving orders and mandates. I simplify this daunting task by maintaining an extensive library of local emergency orders, enabling our tax specialists to guide you through the qualification process.
4. Failing to Document Properly
Compliance is of utmost importance when dealing with tax matters. The consequences of not adhering to IRS standards can be severe. Properly documenting your tax information is crucial. I provide readily accessible documentation to ensure you are well-prepared in case of an IRS review.
5. Claiming Wages that Aren’t Qualified
The ERC program has undergone significant changes since its inception, including one that extended eligibility to businesses that received Paycheck Protection Program (PPP) loans. However, it’s essential to note that wages used for PPP loan forgiveness cannot be used to claim the ERC. Determining which wages are qualified can be daunting, but our proprietary technology is designed to simplify this process.
6. Working with a Filing Firm that Doesn’t Prioritize Compliance
The complexity of relief programs often leaves business owners with more questions than answers. Partnering with a knowledgeable firm prioritizing compliance is crucial to ensure your business is in good hands. I possess extensive tax and finance knowledge and cater to businesses of all sizes. We aim to make the filing process efficient and hassle-free, allowing you to focus on your day-to-day operations.
7. Missing the Deadline
Timing is crucial when it comes to the ERC. One common mistake businesses make is missing the deadline for filing their claim. The ERC has specific deadlines for each eligible quarter, and failing to file within the stipulated timeframe can result in the forfeiture of potential credits. To ensure you get this valuable financial support, staying informed about the filing deadlines and working with tax specialists who can help you meet them is essential.
To Wrap
In conclusion, the Employee Retention Credit (ERC) is a valuable resource that businesses should consider. While navigating its intricacies can be daunting, avoiding common mistakes and seeking professional guidance can provide substantial financial benefits. By collaborating with experts who prioritize compliance and deeply understand tax regulations, businesses can confidently claim the ERC and secure the financial support they need to thrive in challenging times.
Refrain from misconceptions or oversights that deter you from accessing the funds your business deserves. Contact me today to explore your ERC eligibility and streamline the process for maximum benefit.
Solutions by Mike Miller, CPA 