Employee Retention Tax Credit (ERC): What's Different in 2024?

You might be asking yourself "Is ERC is still even available in 2024??" While the program is no longer accepting new claims for wages paid in 2020, there's still a chance to claim the credit for 2021. The deadline to submit a new claim for the 2021 tax year is April 15, 2025.

What's New with ERC Processing? 

The IRS paused processing new ERC claims in 2023 due to a backlog and concerns about fraudulent applications. They're currently prioritizing resolving existing applications with errors or missing information. This means it might take longer than usual to receive a response on your application, but the good news is there IS still time to apply. 

Who Should Apply for the ERC in 2024? 

If you haven't already applied for the ERC for 2021, consider these points to see if you qualify: 

• Revenue Reduction: Your business experienced a 20% or greater decline in revenue in any quarter of 2021 compared to the same quarter in 2019. This test is meant to gauge the financial impact of COVID-19 on your business. 

• Government Shutdown: Your business was significantly impacted by a government-ordered shutdown, such as restaurants that were forced to close or operated with limited capacity due to COVID restrictions. This applies to businesses that were directly affected by government restrictions, not just those that experienced a general decline in customer traffic. 

What About Outstanding Applications? 

If you have a pending application for 2021, be patient. The IRS is working through a backlog and resolving errors. It's recommended that applicants wait and see if the IRS processes their application. 

Audits and Questionable Applications
There have been instances of companies aggressively filing ERC claims for businesses that might not qualify. The IRS offers a program to withdraw a pending claim and avoid any interest and penalty. This protects you from potential penalties if the IRS discovers the error.  

Key Takeaways 

• The deadline to apply for the ERC for 2021 is April 15, 2025. 

• The IRS is prioritizing resolving existing applications with errors. 

• Businesses that experienced a significant revenue decline or government shutdown in 2021 may still be eligible. 

• Be patient if you have a pending application. 

• Consider returning ERC funds if you believe the application was filed incorrectly to avoid penalties. 

Final Thoughts

The ERC program can provide substantial tax relief to qualifying businesses. Do you have concerns about your taxes due to the ERC program? Click on the ‘Let’s Chat' button and see if Kaizen CPAs + Advisors can help take the worry off your plate.