The Employee Retention Credit (ERC) is huge! In March 2021, this credit was extended through Dec. 31, 2021, and then expanded as part of the American Rescue Plan Act of 2021.
But let’s face it … many of us CPAs—the highly trusted, value-adding professionals—are blowing it. We’re not fully grasping the nuances and complexities of this expanded law. As a result, we’re not properly educating and helping our clients with this large, refundable credit—yikes!
So, what are we misunderstanding about this credit? Let’s review.
The ERC is a tax credit first put in place last year as a temporary coronavirus relief provision to assist businesses in keeping employees on the payroll. It definitely helped. Tens of thousands of businesses have already received more than $1 billion in tax credits through the ERC just this year, according to the White House. This boatload of cash flow has provided a night-and-day difference for those companies struggling to keep employees on payroll and their doors open.
However, we’ve also seen many companies close their doors. I wonder, did we help them get the ERC and the maximum amount possible? Did we help them with the proper documentation to pass muster with the IRS? Were we there to help educate them about the new enhancements of the ERC?
Maybe not—and maybe that’s because of our own misunderstandings. Here are the top 10 misunderstandings and myths surrounding the ERC—and how to correct them.