Employee Retention Tax Credit: Frequently Asked Questions

*The IRS has stopped processing new Employee Retention Tax Credit (ERTC) claims for the time being. For more information, visit IRS.gov or listen to our latest ERTC podcast.

**Note: “Our partners at Accelerate Tax remain dedicated to helping small businesses through the ERC submission process. Accelerate Tax emphasizes that understanding and navigating IRS eligibility criteria requires significant expertise and diligence, which they strive to maintain. While no changes have been made to the ERC parameters or overall program, there is a clear shift in the IRS’s processing timeframe. Rest assured, while there might be a shift in processing dynamics, they do not anticipate any significant disruption to clients.”

The Small Biz Ahead community has been buzzing this month with questions about the Employee Retention Tax Credit. I’ve been responding to questions on specific posts throughout the month. 

A little background: the Employee Retention Tax Credit is a potentially significant refund that you can receive based on the employer taxes you paid during certain quarters of 2020 and 2021. There’s still time to apply for this. Learn more in our ERTC article.

Here are a few questions that came up in our monthly Q&A.

Q: Is there a minimum number of employees you need to qualify for this credit?

A: There is not. I have clients with as few as one employee who were able to amend their payroll tax returns and receive this credit. Just be aware that owners and family members don’t qualify as employees.

Q: I’m getting emails from companies promising me big refunds. Are these legitimate?

A: Most likely not. Unfortunately, there are a lot of scammers out there claiming they can get big refunds for businesses in return for up front fees. The IRS has even jumped in to warn taxpayers of this risk. 

To see if you’re eligible, your best bet is to talk to your accounting firm or payroll service. If your accountant isn’t experienced with the credit, they can refer you to someone who is. Most big payroll companies also provide the service.

Generally, you should not be charged to determine if you’re eligible for the credit. But if you are, the company filing the amendment requesting the refund may either charge you an hourly fee for their services or take a percentage of what’s refunded.

Q: Can new businesses qualify?

A: It depends on how you define “new.” Your startup may be eligible if you meet any one of the following criteria:

  • You started you business on or after February 15, 2020
  • Your annual gross receipts don’t exceed $1 million for 2020 and 2021 tax years
  • You have one or more W2 employees, not including owner-operators or family members.

Q: Do nonprofits qualify?

A: Yes, they do. Remember that this is a refund on payroll taxes paid, not income taxes, so nonprofits are definitely eligible to claim this tax credit.

Q: What about family members?

A: Owner-operators and their family members are excluded from the definition of employee.

Ready to apply for the Employee Retention Credit? Accelerate Tax can help. They specialize in helping businesses maximize their ERC refund.

Next Steps: Want to learn more? Sign up for the Small Biz Ahead newsletter to receive a weekly roundup of the latest tools, trends, and resources.

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