The Employee Retention Credit (ERC) is a tax credit that can provide substantial financial relief for businesses impacted by the COVID-19 pandemic. However, many companies have struggled to claim the credit due to its complex requirements and constantly changing regulations. Here are some common errors to avoid when claiming the ERC to ensure your business receives the maximum benefit.

Error #1: Failing to Identify Eligible Employees

One of the businesses’ biggest mistakes when claiming the ERC is failing to identify which employees are eligible for the credit. Eligible employees include those retained during the pandemic and not furloughed or laid off. Employers must also determine whether employees’ wages qualify for the credit and the amount of the credit.

Error #2: Miscalculating the Credit

The ERC is a complex tax credit, and businesses may miscalculate the credit due to intricate rules and regulations. For example, errors can occur when calculating qualified wages, determining the average number of full-time employees, and calculating the credit for each employee. As a result, businesses may not receive the total amount of the credit they are entitled to.

Error #3: Misunderstanding the Interaction between the ERC and PPP

The ERC and the Paycheck Protection Program (PPP) are two programs designed to help businesses impacted by the pandemic. However, companies cannot claim the ERC and the PPP for the same wages. The interaction between the two programs can be confusing, and companies may mistakenly claim both, leading to repayment obligations and penalties.

Error #4: Failing to Document Eligibility

Documentation is crucial when claiming the ERC, and businesses must maintain records supporting their credit eligibility. This includes records of employee retention, wage payments, and other required information. Failure to provide adequate documentation may result in the disallowance of the credit and penalties.

How We Can Help

Navigating the complexities of the ERC can be challenging for businesses, and errors can lead to missed opportunities and financial penalties. That’s where GetMyBizRefund comes in. Our team of experts has extensive experience in ERC compliance. It can help your business claim the credit while avoiding common errors. Contact us today to learn more about our services and how we can help your business recover the maximum amount of ERC.