“Russ,” a client began, “Don’t I qualify for that Employee Retention Credit (ERC) that I keep hearing about?” I told him he didn’t–his business grew during the Pandemic and he didn’t meet the requirements. Yes, it’s not free money for everyone–you had to qualify:
Eligible taxpayers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and Dec. 31, 2021. However, to be eligible, employers must have:
- Sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel or group meetings because of COVID-19 during 2020 or the first three quarters of 2021,
- Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021, or
- Qualified as a recovery startup business for the third or fourth quarters of 2021.
All my client’s business did was grow during the pandemic. Sure, he retained his employees but he didn’t meet the basic standards. Indeed, the IRS highlighted this in their “Dirty Dozen” of tax schemes. As the IRS noted,
When properly claimed, the ERC is a refundable tax credit designed for businesses that continued paying employees while shut down due to the COVID-19 pandemic or that had a significant decline in gross receipts during the eligibility periods. The credit is not available to individuals.
Yes, not everyone qualifies. And some of these ERC mills will take your money–lots of it–up front and keep it if you don’t qualify! As usual, if it sounds too good to be true it probably is.
That does it for the 2023 Tax Season Bozo Tax Tips. Please, don’t do them.
I’ll be back at the end of April with an update on the first part of the 2023 Tax Season.
