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The IRS allowed certain advance payments during the COVID-19 pandemic using Form 7200. However, it stopped accepting Form 7200 after January 31, 2022.

Since businesses could no longer receive advance payments from the IRS, private lenders and some hedge funds began offering advances for employer credits. They filled the gap with an Employee Retention Credit advance payment.

The advance fee structures for hedge funds are currently higher than fees from direct lenders.

Qualifying wages depend on the average number of employees in 2019.

Qualifying Wages 2020

If a business averaged under 100 employees during 2019, it could claim the ERC for all employees, whether working or not. Suppose a business averaged over 100 employees in 2019.

In that case, it could only claim wages for employees who didn’t work or provide services (i.e., on furlough or some other form of suspension from work duties.)

Qualifying Wages 2021

Businesses that averaged 500 or more employees in 2019 could only claim the ERC for qualified wages paid to employees who didn’t work during the qualifying period.

If a business averaged fewer than 500 employees in 2019, it could claim the ERC for all employees, whether working or not.

Employee Retention Tax Credits are sometimes called “America’s best-kept secret.” That’s because Paycheck Protection Program (PPP) loans got most of the attention from business owners.

ERTC was the lesser-known option. Per the National Federation of Independent Business (NFIB), only 4% of small business owners are familiar with the refundable tax credit.

However, now that PPP loans have expired and recent legislation allows businesses that received PPP loans to also file for ERTC, more companies are applying for the credit. As a result, the IRS has a backlog of requests, which has prolonged the turnaround time.

Any filing errors can also cause delays. For example, if you forgot to deduct PPP loan forgiveness, it can take over 12 months to correct the filing and receive your money.

Businesses can apply for the ERC claim on wages during the active period (March 13, 2020-September 30, 2020, for most companies). You can consult your accountant or tax pro on how to complete forms 941 and 941x, or we can help you file for the ERTC with a free consultation.

The Employee Retention Tax Credit expired on September 30, 2021. For a recovery startup business, the credit expired on December 31, 2021.

While the ERC is no longer in effect, employers can still claim the credit for wages paid during the active period. Businesses can file Form 941-X up to three years after filing or two years after paying, whichever is later.