After filing your claim, how long will it take to receive your Employee Retention Credit?
Are you wondering when you’ll receive your employee retention credit?
As part of the CARES Act and subsequent legislation, eligible businesses can receive a credit of up to $5,000 per employee for 2020 and up to $7,000 per employee for 2021. This credit is designed to encourage businesses to retain employees despite the economic impact of COVID-19.
The process of receiving your employee retention credit can vary depending on your business’s circumstances. However, the IRS has recently released guidance on when and how eligible businesses can claim their credit.
Key ERC Takeaways:
- Eligible businesses can claim their credit on their payroll tax filings for the applicable quarter or file an amended payroll tax return for the applicable quarter.
- If an eligible business has already filed their payroll tax return for the applicable quarter, they can file Form 941-X to claim the credit.
- In order to claim the credit, eligible businesses must meet certain criteria, such as experiencing a decline in gross receipts or being subject to a government order that fully or partially suspends their business operations.
If you have not already filed, you can still claim the employee retention credit retroactively in 2023, 2024, and 2025.
See Important 2024 Employee Retention Tax Credit Deadline Information at the Bottom of This Article.
Getting to Know the Specifics of The Employee Retention Credit (ERC)
To qualify for the Employee Retention Credit (ERC), businesses must meet certain eligibility criteria, pay qualified wages to their employees, and are eligible for a maximum credit amount of $7,000 per employee per quarter.
ERC Qualified Wages
As a small to medium-sized business owner, understanding qualified wages is essential when claiming the Employee Retention Credit (ERC). Qualified wages refer to the compensation an employer pays employees during eligible periods of operation impacted by Covid-19.
Qualified wages encompass not only regular salaries and hourly pay but also overtime pay, tips, commissions, and specific health insurance costs paid on behalf of employees.
For example, suppose you own a retail store facing closure per local regulations during the pandemic and continue paying your staff despite their inability to work onsite. In that case, these amounts qualify as part of your ERC calculation.
Maximum Credit Amount
The maximum credit amount for the Employee Retention Credit (ERC) has evolved to provide increasingly substantial financial relief to eligible businesses. Under the initial guidelines established by the CARES Act in 2020, small to medium-sized business owners could claim a refundable tax credit equal to 50% of qualified wages paid, up to $10,000 per employee—resulting in a maximum credit of $5,000 per employee.
Starting from January 1st, 2021, employers can now claim up to 70% of qualified wages for each employee – with wage caps raised from $10,000 annually to $10,000 per quarter.
This shift effectively increases the maximum ERC benefit available per worker to an impressive $28,000 when factoring in all four quarters within a calendar year (up to $7k per quarter).
Changes To The ERC In 2021
Effective January 1st, 2021, the Employee Retention Credit (ERC) underwent significant changes that made it more accessible to businesses. First and foremost, employers can now claim an ERC of up to $7,000 per employee per quarter for wages paid from January 1st through June 30th, 2021.
This is a substantial increase from the previous maximum credit amount of $5,000 per employee for all of 2020. Additionally, eligible employers with gross receipts not exceeding 20% in any quarter relative to the same quarter in the prior year are now eligible to claim the ERC.
Finally, startups not yet in business by February 15th, 2020, but otherwise meet eligibility requirements can qualify for up to $50k per quarter in payroll tax credits based on qualified wages paid between January and June.
Eligibility Criteria
To qualify for the Employee Retention Credit (ERC), businesses must meet specific eligibility criteria. Firstly, the company must have experienced either a full or partial shutdown or suspension of operations due to governmental orders related to COVID-19 or witnessed a significant decline in gross receipts during specified quarters compared with 2019 levels.
An example of an eligible employer would be a restaurant forced to shut down its dine-in services due to local government restrictions while still permitted to provide takeout options during the pandemic.
Moreover, it’s crucial for organizations seeking access to credit not only to fulfill these initial prerequisites but remain vigilant about documentation that supports their claims throughout the process.
How To Claim The ERC
To claim a refund sooner, the ERC businesses need to file an amended Form 941-X and provide supporting documentation; read on to learn more about these forms and how they can help you receive your refund.
Filing Form 941 and 941-X
To claim the Employee Retention Credit (ERC), eligible employers must have already filed Form 941, which reports taxes withheld from employees’ wages, Social Security and Medicare taxes, and any additional taxes.
This form should have already been filed for each quarter the employer wants to receive credit. To maximize your credit amount, ensure qualified wages are properly allocated across quarters.
It’s important to note that businesses cannot claim ERC credits and Paycheck Protection Program (PPP) loans on the same payroll expenses.
Refundable Credit
One of the most significant benefits of the Employee Retention Credit (ERC) is its refundable nature. This means that even if your business has no tax liability, you can still receive a refund for the employee retention tax credit and any excess credit amount.
Employers can also use their ERC refunds against future payroll taxes instead of receiving an immediate cash payment. This option helps businesses manage their current finances while reducing potential tax liabilities.
Documentation Required
To claim the Employee Retention Credit (ERC), businesses must provide proof of their eligibility and qualified wages paid. This documentation includes payroll records, tax filings, and other supporting materials that show how the credit was calculated.
It’s important to keep accurate records of all eligible wages paid and any other relevant expenses related to retention. Examples include health insurance costs, employer-provided retirement plan contributions, and state unemployment taxes.
While it may seem daunting to gather all this information, doing so can help maximize your credit amount and ensure you receive the full benefits of the ERC.
Timeline For Receiving The ERC
The expected processing time for receiving the ERC refund can range from six weeks to six months after updated payroll reports are filed, but taxpayers have reported waiting up to 10-12 months or longer.
Expected Processing Time
Understandably, businesses are eager to receive their Employee Retention Credit refunds. Unfortunately, the processing time for these refunds can be subject to lengthy delays.
While the IRS has not provided a specific timeline for when ERC refunds will be processed and issued, taxpayers have reported waiting anywhere from 10-12 months, sometimes longer, for their ERC refunds.
However, it’s important to note that the ERTC is a refundable credit that businesses can claim on qualified employee wages. Employers can reduce the amount of payroll taxes they have withheld from employees’ wages and immediately be reimbursed for the credit.
Lengthy Wait Times
One of the biggest challenges businesses face when claiming Employee Retention Credit (ERC) is lengthy wait times for refunds. Some taxpayers have reported waiting up to 10-12 months, sometimes even longer, for their ERC refunds.
The IRS has not provided a specific timeline for processing and issuing these refunds, but they have stated that it could take anywhere from six weeks to six months after updated payroll reports are filed.
Amended Forms 941 that have already been filed should expect to see a refund somewhere between those timelines. Businesses must manage their expectations and be patient while awaiting their ERC refund.
Refunds Below $200,000
ERC refunds for eligible employers are generally processed faster and with less scrutiny if they fall below the $200,000 threshold. The IRS has made efforts to accelerate processing times for refunds within this range, recognizing that these smaller refunds can be critical to businesses’ ongoing operations.
In general, businesses should expect to receive their ERC refund 21 days after filing their tax returns in the year following when they claimed the credit. However, processing times may still vary depending on documentation accuracy and compliance with eligibility criteria.
IRS Updates on Processing Times
The IRS has regularly provided updates on the processing times for ERC refunds. However, unfortunately, there is still no specific timeline for when businesses can expect to receive their refunds.
Despite these delays, it’s important to note that the IRS is working hard to process all refund requests as quickly and efficiently as possible. To help speed up your refund request, carefully follow all filing instructions and provide all necessary documentation with your application.
Latest Updates on ERC Processing
As the COVID-19 pandemic continues to impact businesses, small to medium-sized business owners must stay updated with the latest ERC processing delays and potential legislative changes.
First Quarter 2021 Updates
In the first quarter of 2021, business owners should be aware of several updates to the Employee Retention Credit (ERC). The Consolidated Appropriations Act extended the ERC until June 30th, 2021, and expanded eligibility for businesses that experienced a significant decline in gross receipts.
Additionally, eligible employers can now claim an ERC of up to $7,000 per employee per quarter for wages paid between January 1st and June 30th, 2021. These updates mean more businesses are now eligible for the credit and could receive higher refunds.
Current Status Of Processing
As of the first quarter of 2021, the processing time for Employee Retention Credit (ERC) refunds remains lengthy. Many taxpayers have reported waiting up to a year or more for their refunds.
Despite this uncertainty, there are steps you can take to ensure a smoother refund process. Working with an experienced tax professional who understands the ERC guidelines thoroughly and can help you navigate the application process correctly is essential.
Additionally, staying organized and keeping detailed documentation will help streamline your claim and reduce the risk of delays or rejections.
COVID-19 Related Delays
The COVID-19 pandemic has caused significant delays in processing Employee Retention Credit refunds. The IRS is still grappling with processing returns for many businesses. Demand has been high due to eligibility rules changes, uncertainty around filing procedures, and the sheer volume of requests received.
Many small to medium-sized business owners report waiting months beyond the initial six-month timeline the IRS gives to receive their refund.
Legislation Potentially Impacting The ERC
Recently, the Consolidated Appropriations Act was passed by Congress, which extended and expanded the Employee Retention Credit (ERC). This legislation makes several changes to the eligibility criteria and maximum credit available for small business owners.
It also expands eligible expenses in qualified wages, including healthcare costs not otherwise covered by another tax credit or subsidy. Additionally, this act created a new category of businesses referred to as “recovery startup businesses,” designed to help newer companies previously ineligible for ERC benefits. However, it may now receive a credit of up to $50,000 per quarter.
Barriers To Receiving The ERC
Businesses may face barriers to receiving the ERC, such as changes in eligibility requirements and issues with documentation, but assistance is available to help overcome these challenges.
Changes In Eligibility Requirements
Business owners must keep up with any changes to the Employee Retention Credit (ERC) eligibility requirements, which could impact their ability to claim the credit.
In 2021, the eligibility criteria were expanded to include new employers that did not exist during 2019 and max out at 500 employees.
However, it’s also important to note that there have been debates about making further changes or potentially ending the ERC altogether as part of new legislation concerning COVID-19 relief efforts.
Issues With Documentation
Businesses must provide accurate and complete documentation to claim the Employee Retention Credit. This includes proof of eligibility, qualified wages, and other required information.
One common issue businesses face when claiming the ERC is incomplete or missing documentation. Without the proper documentation, employers may face further delays or even be denied the credit altogether.
To ensure a smooth process, businesses must keep detailed records and consult with tax professionals or advisors if necessary.
“One common issue businesses face when claiming the ERC is incomplete or missing documentation. Without the proper documentation, employers may risk facing delays or even being denied the credit altogether.”
Assistance Available For Businesses
Small to medium-sized businesses seeking assistance filing and claiming the Employee Retention Credit (ERC) can turn to tax professionals and advisors for support. These experts can provide guidance on eligibility requirements, qualified wages, documentation required, and maximizing the credit amount.
Online resources and tools are also available for ERC filing services, answering common questions about credit and providing up-to-date information on processing times and IRS updates.
In addition to these resources, business owners must stay patient while waiting for their ERC refund due to potential delays in processing times by the IRS.
Maximizing Your Employee Retention Credit
To maximize your Employee Retention Credit, consider strategies such as increasing the credit amount by extending the eligibility period or exploring eligibility for additional credits.
Strategies For Increasing Credit Amount
There are several strategies that small to medium-sized businesses can employ to maximize their Employee Retention Credit (ERC). One effective method is by optimizing the timing of payroll costs.
Additionally, businesses must document all qualified expenses and ensure they have proper documentation readily available in case of an audit or inquiry from the IRS.
Another way to increase ERC credits is by exploring additional tax credits and incentives specific to your industry or business structure.
Extending The Period Of Eligibility
One way to maximize your Employee Retention Credit is by extending the eligibility period. The Consolidated Appropriations Act has extended the program to include businesses operating on or after January 1st, 2021, and before July 1st, 2021.
This extension ensures that more small and medium-sized businesses can qualify for the credit.
Extending your eligibility period could result in a higher credit amount allowing you to retain more employees while also recovering costs from payroll taxes. It’s essential to work with tax professionals knowledgeable about ERCS since not every company qualifies for this benefit.
Eligibility For Additional Credits
In addition to the Employee Retention Credit, eligible employers may also be able to claim other tax credits that can further offset their payroll tax liabilities. For example, businesses that employ individuals from certain targeted groups, such as veterans or those receiving government assistance, may qualify for the Work Opportunity Tax Credit (WOTC).
Additionally, businesses that invest in research and development activities could claim the Research and Development Tax Credit (R&D Credit). These credits can potentially increase the number of total credit refunds available to qualifying employers.
Resources For Filing And Claiming The ERC
Small to medium-sized business owners can seek help from tax professionals or advisors for filing and claiming the ERC, use online resources and tools on various government websites such as the IRS, or refer to common questions about the ERC as a reference.
Tax Professionals And Advisors
It’s important to note that claiming the Employee Retention Credit (ERC) can be complex, requiring careful attention to detail and knowledge of tax laws. For this reason, many small to medium-sized business owners may benefit from seeking assistance from tax professionals or advisors.
Additionally, tax professionals may provide valuable guidance on maximizing your ERC refund amount through strategic planning and other tools. Some businesses have reported receiving larger refunds than they initially expected with the help of an experienced advisor.
Online Resources And Tools
As a small to medium-sized business owner, navigating the complex process of claiming your Employee Retention Credit can be overwhelming. Fortunately, various online resources and tools are available to help simplify the process for you.
The IRS website offers a wealth of information regarding ERC eligibility requirements, qualified wages, and documentation required for filing.
Furthermore, an ERC Filing Service assists businesses in claiming employee retention credit refunds faster by amending payroll tax returns retroactively. This enables businesses to save time and avoid common errors made while processing their employee retention credit refund claims manually.
According to recent reports, taxpayers have reported waiting anywhere from 10-12 months or longer for their ERC refunds due largely to some complicated processes involved with manual filling, leading to backlog issues at IRS offices during this period.
Common Questions About The ERC
Small to medium-sized business owners may have several questions about the Employee Retention Credit (ERC). One of the most common questions is how to claim credit. Businesses can claim the ERC by filing Form 941-X, Employer’s Quarterly Federal Tax Return. Form 7200, Advance Payment of Employer Credits Due to COVID-19, is no longer used.
Additionally, businesses must file Form 8974 with their employment tax return for each quarter they claim the ERC. Another common question is how much of a refund can be expected from the ERC.
The amount of money that can be claimed through this credit depends on factors such as qualified wages paid and the number of employees retained during eligible periods. However, it’s important to note that there are maximum credit amounts that apply based on eligibility criteria and payroll expenses.
It’s also important for small business owners expecting an ERC refund to know when they might receive it.
Being Patient While Awaiting Your ERC Refund
Businesses need to manage their expectations and be patient while awaiting their ERC refund, which can take several weeks to months due to the influx in refund claims and COVID-19 related delays.
Tips For Managing Expectations
It’s important for small to medium-sized business owners to manage their expectations when it comes to receiving their Employee Retention Credit (ERC) refund. While the IRS has stated that refunds can take six weeks to six months after updated payroll reports are filed, taxpayers have reported waiting longer than expected.
Firstly, stay informed by regularly checking for updates from the IRS regarding ERC processing times. Secondly, be patient, as delays can occur due to various factors such as COVID-19-related issues and changes in eligibility requirements.
Thirdly, follow up with the IRS if you haven’t received your refund within a reasonable time or if there are discrepancies in your documentation.
It’s essential to remember these tips to properly prepare yourself while awaiting your ERC refund.
Importance Of Following Up With The IRS
It is essential for small to medium-sized business owners to follow up with the IRS regarding their Employee Retention Credit (ERC) refund. As mentioned earlier, refunds can take several months or even longer, and in some cases, issues or errors may need correcting.
The best way to follow up on your ERC refund status is by checking the IRS website regularly or calling an IRS representative for updates. It’s also important to keep accurate records of all documentation related to your ERC claim and stay informed about any legislative changes that could impact the credit amount or eligibility criteria.
Seeking Professional Assistance If Necessary
If you have been waiting for your ERC refund and are increasingly frustrated with the lengthy wait times, it may be time to seek professional assistance. Tax professionals and advisors can help you navigate the complicated process of claiming the ERC, ensure all necessary documentation is in order, and follow up with the IRS on your behalf.
Additionally, online resources and tools can help understand eligibility requirements, qualified wages, maximum credit amounts, and more. As a small to medium-sized business owner, it’s crucial to prioritize the financial health of your business during these uncertain times.
Seeking professional assistance will save you time and add value to your overall operations by ensuring compliance with tax regulations while maximizing eligible credits.
Conclusion and Summary for When Will I Get My Employee Retention Credit?
The Employee Retention Credit has been a lifeline for many employers affected by the COVID-19 pandemic. It provides a refundable tax credit that can help businesses keep their employees on payroll during these uncertain times. However, many employers are still wondering when they will receive their credit.
The timeline for receiving the Employee Retention Credit can vary. It depends on a variety of factors, including your tax situation, your filing status, and the current state of the IRS processing times.
First, make sure that you are eligible for the credit and have submitted the necessary paperwork to claim it. This includes filing Form 941 or Form 941-X, as well as any other required tax forms. You should also be prepared to provide documentation to support your claim if requested.
Once you have submitted your claim, you can check its status using the IRS’s online platform.
Overall, while the process of receiving the Employee Retention Credit may take some time, it’s worth it to ensure that you receive the financial support you need for your business.
Good news. There is still time to file! The employee retention tax credit can still be claimed retroactively and there is still time to file, even in 2023, 2024, and 2025 for the past tax years.
Employee Retention Tax Credit (ERC / ERTC) Help: Claim Up To a $26,000 Refund Per Employee for Your Business
Disaster Loan Advisors™ can assist your business with the complex and confusing Employee Retention Credit (ERC) and Employee Retention Tax Credit (ERTC) program, without you having to pay an excessive percentage of your hard earned ERC refund.
DLA doesn’t charge a percent like many companies do. Our flat fee structure is fair and reasonable based on the amount of work involved. Keep More of Your Refund™
Depending on eligibility, business owners can receive up to $26,000 to $33,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.
The ERC / ERTC Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.
Schedule Your Free Employee Retention Credit Consultation to see what amount $ of employee retention tax credit your company qualifies for.
ERC Deadline Urgency in 2024
April 15, 2024 Deadline for the 2020 ERC Tax Year
The deadline is coming up for the final opportunity to retroactively claim your business Employee Retention Credit for the past 2020 tax year. With the April 15, 2024 deadline fast approaching, we urge you; don’t let this final chance pass!
While not all businesses will qualify, as it depends on multiple factors per IRS Rules and Guidelines, you might be leaving significant financial relief on the table from prior COVID impact to your business during the past 2020 and 2021 business operation years.
Last year, in September 2023, the IRS temporarily paused processing ERC Claims for the remainder of last year. We at Disaster Loan Advisors (DLA) predicted this over one year ago when we made this ERC video warning business owners. See the ten-minute mark of the video for details.
TAKE ACTION NOW IN 2024
Even though the IRS has temporarily paused processing, you will still want to check eligibility and file now (if you qualify) because once the IRS will resume processing, ERC tax credit claims are processed in the order they are received.
If you haven’t previously filed for the ERC Credit, it is worth scheduling a phone call to at least explore your possible eligibility from both the past 2020 and 2021 business tax years. Contact us today for a deep-dive analysis to determine if your business qualifies one or more quarters from the 2020 and / or 2021 tax years.
As a leading dedicated member of the Tax and Accounting Team at Disaster Loan Advisors™, Mark focuses on unlocking the ERC Tax Credit's potential for eligible firms that qualify, providing strategic advice, and detailed guidance to ensure substantial financial recovery and growth. His methodical approach to client engagement includes comprehensive deep-dive analysis, customized consultation and guidance, and a commitment to achieving tangible results for each business served.
Disaster Loan Advisors™ (DLA) offers a comprehensive suite of services designed to navigate the complexities of the Employee Retention Tax Credit (ERC) program, ensuring that qualified businesses leverage the maximum possible benefit with minimum hassle. Unlike some firms that charge exorbitant contingency or percentage-based fees (often between 10% to 30% of your ERC refund), DLA operates on a fair and reasonable, transparent flat-fee structure that aligns with the IRS's guidelines.
If you are looking for an ERC Company that believes in providing professional ERC Services and value for small business owners, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors™ is a good fit for you. STAY SAFE. STAY COMPLIANT. KEEP MORE OF YOUR REFUND.™
- 941-X: 17. Nonrefundable Portion of Credit for Qualified Sick and Family Leave Wages for Leave Taken After March 31, 2020, and Before April 1, 2021, Form Instructions (revised 2024) - April 29, 2024
- 941-X: 16. Qualified Small Business Payroll Tax Credit for Increasing Research Activities, Form Instructions (updated 2024) - April 28, 2024
- 941-X: 15. Tax Adjustments, Form Instructions (2024 updates) - April 27, 2024