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COVID-19 and the Employee Retention Tax Credit: Did I Miss the Deadline?

| June 13, 2023 | By

Tax Day is fast approaching, and many businesses are still unsure whether they’re eligible to claim the Employee Retention Tax Credit (ERTC). Although for-profit organizations cannot claim the tax credit for wages paid to employees in 2022 or 2023, they do have until 2024 to amend their tax filings retroactively.

What do business owners need to know about the ERTC deadline?

According to the IRS, “The Employee Retention Credit under the CARES Act encourages businesses to keep employees on their payroll. The refundable tax credit is 50 percent of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.”

Simply put, this tax break applies to companies that retained their paid employees during the COVID-19 pandemic in 2020 and 2021, allowing them to claim credits on qualified employee wages, including health insurance costs. Per quarter, employers could claim up to $5,000 for each employee during 2020 and up to $7,000 in 2021.

The Employee Retention Tax Credit (ERTC) sunsetted on October 1, 2021, cutting the planned program length short by three months. That means businesses are eligible to claim the ERTC for wages paid to employees from March 12, 2020, through the cutoff date of Oct. 1, 2021, simply by amending their previous tax returns for those qualifying years.

Did your business miss the ERTC deadline?

For-profit companies have up to three years from their tax return’s due date—April 15—to apply for the Employee Retention Tax Credit. To claim the ERTC, they must correctly fill out the amended quarterly payroll tax return or Form 941-X.

This means employers have until April 15, 2024, to claim the ERTC for 2020. The 2021 ERTC can be retroactively claimed until April 15, 2025.

How does the ERTC work?

Once taxpayers submit Form 941-X for the appropriate year, they must update that year’s tax return to account for the ERTC because it’s considered taxable income.

Organizations that still haven’t filed their 2021 tax returns and want to apply for the 2021 Employee Retention Tax Credit may want to delay filing. Instead, look at the available ERTC information and include them in the tax return.

Why should your business apply for the ERTC now?

Although these tax deadlines seem far away, unexpected changes through new bills or amendments could alter the current ERTC standards or even eliminate official deadlines.

The federal government signed the Infrastructure Investment and Jobs Act in November 2021. This legislation retroactively ended the ability to claim the Employee Retention Tax Credit for the fourth quarter of 2021, causing companies to miss out on those tax credits.

Avoid ERTC scams during tax season.

Last year, the IRS issued an alert to business owners, reminding them to stay vigilant and avoid ERTC mills and other tax scams. An ERTC mill is a third-party tax or financial service provider that will advise for-profit companies to claim the Employee Retention Tax Credit, even if they’re not eligible for it.

An ERTC mill will often give businesses incorrect or incomplete advice. This can lead to financial headaches because organizations will have to return any tax credits received—with additional penalties and interest—if they incorrectly claimed the ERTC.

Get the best ERTC advice for your business.

Did your company continue operating through the COVID-19 pandemic? If you received Paycheck Protection Program (PPP) funding, you may qualify for the ERTC.

Contact us today to learn more about the Employee Retention Tax Credit. We have documented more than half a billion dollars in ERTC claims for more than 1,000 clients. We’ll even file for you! Call us today at (508) 797-5003 for your free ERTC consultation.