The Employee Retention Tax Credit (ERTC) is a pandemic-era payroll tax credit. It was created to help employers who kept their employees on their payroll during difficult times. Unfortunately, the credit has been abused by a few bad actors. However, it’s still available and can provide a significant source of funds even today for eligible employers. There’s been a lot of news around the ERTC lately. Here are the three most important points to know.

1. The ERTC is alive and well.

The ERTC remains available to eligible taxpayers. Yes, it’s been temporarily suspended—more on that below. But the time frame to apply for the payroll tax credit hasn’t changed.  Applications are due by April 15, 2024 for qualifying 2020 quarters, and April 15, 2025 for qualifying 2021 quarters.

Eligibility for the credit hasn’t changed, either. It remains available for businesses that were impacted by COVID—either because of shutdowns or revenue declines—during certain periods of 2020 and 2021.  

The credit can be as much as $7,000 per employee per quarter, depending on the quarter. To apply, seek the assistance of a reputable payroll company, accounting firm or financial services provider. They can help determine if you’re eligible and guide you through the filing process.

2. The ERTC is suspended as of this writing… but only temporarily.

ERTC updates

The Internal Revenue Service suspended the ERTC in September 2023 due to concerns about ineligible claims that were “increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing.”

As of this writing, this moratorium is still in effect. But most financial professionals in the industry expect the IRS to lift the suspension during the first quarter of 2024. In the meantime, the IRS is still processing claims submitted before Sept. 14, 2023. Those claims will be processed at a slower pace and could take 90 to 180 days to complete.

3. If you received the ERTC in error, there’s a new amnesty opportunity.

If you submitted a claim and wish to withdraw it, that opportunity expired.  However, at the end of December 2023, the IRS announced a new “voluntary disclosure program.” Taxpayers who think they received the ERTC erroneously for any reason can pay back the money (less a 20% discount to cover any fees they paid) with no questions asked.  

Remember: Even if you hired a third party to file your amended payroll tax returns, the responsibility (and liability) for inaccuracies remains on you.

According to the agency, you can apply for amnesty using Form 15434 if:

  • You are not under criminal investigation and have not been notified that you are under criminal investigation.
  • You are not under an IRS employment tax examination for the tax period for which you’re applying.
  • You have not received an IRS notice and demand for repayment of part or all of the ERTC.
  • The IRS has not received information from a third party that you are not in compliance or have not acquired information directly related to the noncompliance from an enforcement action.

Interest and penalties will not be assessed if you pay back the money, unless you’re paying back in installments. This is a good deal for people who are concerned that their returns were filed in error, and it’s a way to avoid potential fines, civil or even criminal litigation.

The bottom line: The ERTC is alive and well, and if you are legitimately eligible, you still have time to apply. Consult with a professional and don’t let this opportunity pass.

Next steps: Want more small business tips as you work toward your entrepreneurial goals? Sign up for the Small Biz Ahead newsletter today.