The ERC Process

Dec 8, 2022 | Blog

To file for the Employee Retention Credit (ERC), eligible businesses must complete and submit the appropriate forms to the Internal Revenue Service (IRS). Here are the steps involved in the process:

  1. Determine eligibility: The first step is to determine if your business is eligible for the ERC. Ensure you have a tax professional who is well versed I the nuances of the ERC. This includes reviewing the eligibility criteria related to government shutdowns, declines in gross receipts, and supply line distribution analysus. The criteria can vary depending on whether the wages are for 2020 or 2021.
  2. Gather documentation: To support your claim for the ERC, you will need to gather documentation, such as payroll records, tax returns, and evidence of government orders or business closures. This documentation should be kept on file and may be requested by the IRS during an audit or investigation.
  3. Calculate the credit: The ERC is calculated as a percentage of qualified wages. Qualified wages may include both cash wages and certain health benefits. The credit can be up to 70% of qualified wages paid per quarter (Q1-Q3) in 2021 and up to 50% of qualified wages paid in 2020.
  4. Complete the appropriate forms: Once you have determined your eligibility and calculated the credit, you will need to complete the appropriate forms.
  5. Submit the forms: The completed forms should be submitted to the IRS. The IRS has provided specific instructions for filing and payments related to the ERC.
  6. Monitor the status: Once the forms have been submitted, it’s important to monitor the status of your claim. The IRS may contact you for additional information or documentation, and it may take several weeks or months for the credit to be processed and applied to your account.

The ERC is a complex program with specific rules and limitations, so it’s important to have a clear understanding of the process and requirements before filing. As always, businesses should consult with a tax professional to ensure that they are meeting all requirements and properly claiming the credit. If you would like to talk to one our tax professionals, please follow the link and one of our experiences tax professionals will contact you regarding your eligibility or answer any questions you may have.