How To Apply For The Employee Retention Tax Credit

The words “employee retention tax credit” might be haunting your dreams, your business websites, or your weirdly targeted podcast ads. While we can’t promise to make it go away, we can absolutely tell you how to apply for employee retention credit (ERC).

In this article, we will walk you through a brief explanation of the ERC, the two options you have for applying for the ERC, if you should hire a professional to help you, and, of course, how to apply for the ERC.

What Is The Employee Retention Tax Credit?

The employee retention tax credit (ERC) program was created under the CARES Act in 2020 to incentivize businesses with a refundable tax credit for keeping their staff on payroll during the economic shutdown. This program has since ended, but you can still claim the 2020 ERC until April 15th, 2024, and the 2021 ERC until April 15th, 2025. The ERC can be claimed for wages paid in 2020 can be as high as $5,000 per employee, and the ERC for wages paid in 2021 can be as high as $21,000 per employee.

Find out if you qualify for the ERC and exactly how much you could be getting back with your ERC refund.

Your Two Choices For How To Apply For The Employee Retention Credit

Are you a lone wolf in the tax world, or do you need a little extra help?

There’s no shame in admitting you haven’t read the over 100 pages of official ERC guidance. Luckily for us all, there are people who have devoted their time and energy to becoming bona fide ERC experts and offering easy-to-use applications for the ERC.

If you choose to forgo the specialist (and the fees that will come with them) and apply to claim your ERC, you’re in good company. There are plenty of small business owners who have followed the same path who now stand before you and have lived to tell the tale.

Should I Hire A Professional To Claim My ERTC?

While you can file the ERC credit on your own, hiring an accountant or using a trusted ERC funding company can save you time and ensure that everything is done correctly.

The Pros & Cons Of Apply For The ERC Yourself

The IRS has provided Form 941-X, which was modified to specifically allow small business owners to amend their 2020/2021 taxes to claim the ERC credits they qualify for. This is a lengthy process and with the number of changes the ERC went through in 2021 alone, it can be difficult to understand your eligibility and how to calculate your ERC.

Plenty of websites, including the official IRS site, offer guidance and step-by-step checklists for you to follow. You can also find websites offering ERC calculators, but remember that they might not be the most accurate.

The Pros & Cons Of Applying For The ERC Through A Professional

If you choose to hire a professional, there are many different options for assistance. You can either go through a trusted accountant, or you can use a company that specializes in ERC funding to handle calculating your ERC refund and filing your form 941-x for you.

Financial/lending companies such as Lendio offer services to business owners to help them with the process of applying for the ERC. Most companies offering these services have partnered up with a network of professionals who have worked to become experts in the complicated world of ERC claiming. Hiring a professional makes less work for you, gives you access to guidance throughout the entire process, and peace of mind knowing the correct forms are being filed even as qualifications and processes continue to change.

Check out our list of the best companies to work with for ERC funding for more options.

Potential downsides to hiring a professional are fairly obvious but worth consideration. Paying someone else to do something you can technically do yourself might go against your business model or personal preferences. You’re also trusting another person to complete your application with the same care you would. Despite these two relatively mild downsides, when there are potentially thousands of dollars worth of refund credits waiting for you, it might be worth spending the extra money to make sure you don’t miss out because of a mistake on a form.

How To Apply For The Employee Retention Credit In 5 Steps

Want to know how to apply for the ERC through a lender or other program? We’ve broken down the general process into five easy-to-understand steps that will get you well on your way to claiming those refund credits in the spring.

Step 1: Determine Your Eligibility For The ERC

First things first, is your business even eligible for the ERC? Below we provide a basic list of eligibility requirements, but you can find a much more in-depth list in our article on how to qualify for the ERC.

Basic eligibility requirements:

• Your business was shut down due to a governmental order during any part of 2020 and/or parts of 2021, the business’s gross receipts in any quarter of 2020 declined 50% or more relative to the same quarter of 2019, and you kept 80% of your employees on your payroll
• You continued to pay wages throughout any shutdowns you experienced
• You are considered a recovery startup business

Some lenders or programs offer questionnaires to help you figure out if your business is eligible for the ERC.

Step 2: Gather Your Documentation

When you are preparing to apply for your ERC through a lender or other program, act like you’re filing your taxes for the year and collect the important documents needed.

• 2020 and 2021 tax returns (include previous years as well if you’re filing after 2022)
• 2020 and 2021 payroll records
• 2019-2021 records of profits
• Record of number of full-time and part-time employees in 2019-2021

Step 3: Complete Your ERC Refund Application

Now that you’ve determined that you’re eligible and have gathered your important documents, it’s time to complete your ERC refund application! Do your research and read through the terms and conditions your lender/program may have before you decide which professional service you’re going to use.

Make sure you note what documents they need from you, as most companies will need to determine your eligibility independently before they accept any application from you. Give them all information they request, usually general personal and business-related, and attach all documents they need to verify your eligibility.

Once you’re verified, they will begin preparing your 941-X Amended payroll returns. Keep an eye on your email or account so you can get them any other information or documents they may need ASAP to ensure your application process is speedy.

Step 4: Keep In Touch Throughout The Process

As we mentioned above, staying in touch with your lender/program is important throughout the application process to keep everything moving smoothly. Whatever contact information you give them (personal/business cell, landline phone number, and/or email), make sure it is something you access daily. Turn your ringer on and add their number to your contacts to avoid any unintentional missed or blocked calls. Add their email to your contacts as well while you’re at it, and make sure you’re checking it regularly so you can send any additional documents they may require.

Step 5: Receive Your Employee Retention Credit Refund

You did it! As long as your application is approved, the IRS will issue you your credits!

Lendio quotes 2-8 months for the ERC turnaround, but with the influx of applications coming soon and potential staff shortages (not to mention the changing requirements), it might be best to assume it will take closer to 10 months before you see any of those credits.

The Bottom Line On Applying For The ERC

While the ERC can be daunting, it is a great way to pay yourself back for keeping your employees on payroll during the different economic shutdowns we experienced in 2020 and beyond. Take some of the stress out of a potentially overwhelming process and consider hiring a professional to help you apply for the ERC. Research never hurts; who knows, you could learn that you’re more of an expert than you thought!

Take the information and steps we’ve provided you and start the process of applying for the ERC today! We have several other articles that can help if you have more questions concerning the ERC or want to share the information with your network.

Again, to learn more about the ERC, we suggest you read about what is the employee retention tax credit.

Applying For The Employee Retention Credit FAQs