ERC Credit: Too Good to Be True?

As a business owner, you may have already heard about the Employee Retention Credit (ERC) tax credit. It’s an amazing tax credit that can sometimes save businesses an enormous amount of money. But while you’d love to get a large tax credit, you might worry that there’s a hidden catch. 

At LG Resources, we’re here to provide you with accurate information about ERC eligibility. As a leading firm that helps organizations with ERC eligibility and applications, we understand your concerns. 

In this blog post, we will debunk some common misconceptions about the ERC tax credit and explain whether your business is truly eligible.

What is the ERC Tax Credit?

The Employee Retention Credit (ERC) is a refundable tax credit that was designed to help businesses after the COVID-19 pandemic hit. While it was designed to help businesses that retained their employees during the pandemic, it’s not too late to apply in 2023.

The credit is based on 2020 and 2021 metrics, but businesses that have not yet applied in 2023 can still apply. However, the eligibility criteria and credit value have evolved over time.

Am I Really Eligible For a Tax Credit That Large?

Many employers are not eligible to receive the maximum ERC credit for all of their employees. Nevertheless, your business is more likely to be eligible for at least some credit than you probably think.

The federal government created the ERC to help employers keep people on payroll during the pandemic. While we are no longer under pandemic restrictions in 2023, some organizations are still dealing with the fallout from that time period and the inflation that followed. Employers who haven’t yet claimed the credit can still do so in 2023, even though the relevant tax years are long past.

The amount of credit you are eligible for is based on your circumstances and the qualified wages you paid in 2020 and 2021. What’s more, the rules for which wages qualify depend on the year you are calculating for and your business size. Here are some general guidelines for businesses that meet the eligibility rules:

• For the 2020 calendar year, qualified wages include all wages and health plan expenses for employees — assuming you had 100 or fewer full-time employees in 2019. If you had more than 100 full-time employees in 2019, you can only count wages paid to employees who weren’t providing services in 2020.
• For 2021, employers that had 500 or fewer full-time employees in 2019 can count all wages and health plan expenses as qualified wages.

Many of the CEOs and business owners we talk to mistakenly believe they aren’t eligible for the ERC. After we review their situation, they’re often surprised to learn that they can claim the credit after all.

Common ERC Misconceptions in 2023

Myth #1: The ERC is too good to be true.

Reality: The ERC is a legitimate tax credit backed by the government.

The federal government introduced the Employee Retention Credit as part of the CARES Act. It was initially designed to provide relief to employers affected by the COVID-19 pandemic. The ERC has been extended and expanded through subsequent legislation, demonstrating its legitimacy and ongoing support.

Myth #2: Only the most severely affected business can qualify for the ERC. 

Reality: Many employers can qualify for the ERC, even if the pandemic didn’t impact them as much as it did other businesses.

While the initial criteria focused on businesses significantly impacted by the pandemic, the eligibility requirements have evolved. Now, a wider range of businesses can qualify for the ERC. If you experienced a partial or complete shutdown or faced a decline in revenue, you may be eligible.

Myth #3: Applying for the ERC is too complicated and isn’t worth it.

Reality: Expert assistance can simplify the ERC application process.

Most people, even tax professionals, have trouble sorting through the complexities of the ERC application process. However, you can work with experienced ERC professionals like the LG ERC team to simplify the process. We have a deep understanding of the ERC requirements, documentation, and calculations. 

Our team will guide you through the entire process, ensuring that you meet the eligibility criteria and maximize your benefits. With our support, you can focus on running your business while we handle the intricacies of the ERC application.

Myth #4: The ERC isn’t that big of a benefit.

Reality: The ERC can sometimes lead to substantial tax savings. You won’t know for sure until you find out what you qualify for. 

The ERC often offers significant financial benefits that can make a large difference to your bottom line. For some eligible businesses, the credit can be as high as $26,000 per employee. You can use that money however you’d like, whether it’s to retain your valuable workforce, invest in developing a new product, or improve your business’s financial stability. 

Myth #5: If you received PPP loans, you’re not eligible. 

Reality: PPP loan recipients can also qualify for the ERC.

Contrary to popular belief, businesses that received Paycheck Protection Program (PPP) loans can still be eligible for the ERC. Legislative changes made it so that businesses could claim the ERC for wages that were not forgiven under the PPP loan program.

Myth #6: The ERC is only for small businesses or large corporations.

Reality: Organizations of all sizes can qualify for the ERC, including nonprofits.

The ERC is not limited to corporations of a certain size. Just about any kind or size of organization can qualify, although the rules for qualified wages are different depending on the number of employees you have.

The Employee Retention Credit is a real, valid, and often substantial tax credit. It is a legitimate tax credit backed by the federal government, designed to support businesses during challenging times. 

This tax credit is a real opportunity for your business to access significant tax savings, retain employees, and improve your financial stability. If you need help figuring out what you’re eligible for and how to apply, LG can help. We can also answer your ERC questions and concerns. 

Contact LG today to learn more about the ERC and whether you qualify. Our team of experienced professionals is ready to guide you through the ERC application process, provide expert advice, and help your business thrive in today’s challenging economic landscape.