Time is running out for eligible businesses to claim the valuable Employee Retention Credit (ERC) for 2021. If your business hasn’t taken advantage of this substantial tax credit, there’s still a window of opportunity—but it’s closing fast. The deadline to amend your payroll tax returns is April 15, 2025, and that date will be here before you know it.
Here’s everything you need to know to make sure you don’t miss out on this significant financial opportunity.
What Is the ERC?
The Employee Retention Credit (ERC) is a refundable tax credit designed to help businesses that kept employees on payroll during the economic challenges of the COVID-19 pandemic. For the 2021 tax year, eligible businesses can claim up to $7,000 per employee per quarter for the first three quarters of the year—a total of up to $21,000 per employee.
To put that into perspective:
- 10 qualifying employees = up to $210,000 in refundable tax credits for your business.
Who Qualifies for the 2021 ERC?
Your business may qualify if it meets any of the following criteria:
- Significant Decline in Gross Receipts:
- Your business experienced a decline of at least 20% in gross receipts for a qualifying 2021 quarter (Q1, Q2, or Q3) compared to the same quarter in 2019.
- Full or Partial Suspension of Operations:
- Your business was impacted by a government-ordered full or partial suspension of operations due to COVID-19 during one or more of the qualifying quarters.
- Business Size:
- Businesses with 500 or fewer full-time employees can claim the ERC for wages paid to all employees.
- Larger businesses can claim the credit, but only for wages paid to employees who were not working.
- New Businesses Started After February 15, 2020:
- If you started a business after this date, you may qualify for up to $100,000 in credits.
Why Act Now?
The ERC isn’t claimed on your regular tax return—it’s claimed by amending your payroll tax returns using Form 941-X for the applicable quarters.
- The deadline to amend 2021 payroll tax returns is April 15, 2025.
- This may seem far away, but the process can take time, especially when gathering records, verifying eligibility, and ensuring accuracy.
What’s at Stake?
This isn’t just small change. The ERC can provide a significant financial boost for your business. Eligible businesses can claim:
- Up to $21,000 per employee for 2021.
- For example, with 10 eligible employees, that’s up to $210,000.
These funds are refundable tax credits, meaning they can provide actual cash back to your business, helping cover operating costs, invest in growth, or provide a buffer against future uncertainties.
Common Misconceptions About the ERC
Many businesses have overlooked the ERC because of confusion or misinformation. Let’s clear up a few myths:
- “We got a PPP loan, so we’re not eligible.”
- False! You can claim both, but you can’t double-count wages used for PPP loan forgiveness.
- “It’s too late to apply.”
- Not true! You have until April 15, 2025, to amend your payroll tax returns for 2021.
- “The process is too complicated.”
- While the rules are detailed, working with a knowledgeable tax advisor (like us!) makes the process manageable and ensures accuracy.
Next Steps: Don’t Miss Out!
If you think your business might qualify:
- Review your 2021 financials for drops in revenue or operational disruptions.
- Consult with a tax professional to confirm eligibility and calculate potential credits.
- Amend your payroll tax returns (Form 941-X) before the April 15, 2025 deadline.
Why Work with Molen & Associates?
Navigating the ERC can be complex, but that’s where we come in. Our team specializes in tax credits like the ERC, ensuring you maximize your claim while staying compliant with IRS regulations.
Final Takeaways:
- The deadline is April 15, 2025, but don’t wait—start the process now.
- You could claim up to $21,000 per employee for 2021.
- PPP loan recipients are still eligible.
- New businesses started after February 15, 2020, may qualify for up to $100,000.
Don’t leave money on the table. Contact Molen & Associates today to see if your business qualifies and to start your claim.
