Insights

Employee or Independent Contractor Status Clarified Further by The U.S. Department of Labor

Corporate Transparency Act Ruled Unconstitutional. The Impact On Beneficial Ownership Information Reporting.

Reminder of Annual Election of New York State and New York City Pass-through Entity Tax (PTET)

House Passes Bill Expanding Child Tax Credit and Business Breaks

Misconceptions About the Earned Income Retention Credit (ERC)

Business owners are receiving constant emails from a variety of sources claiming that they can facilitate Earned Income Retention Credits for their companies. Many of these offers come with fairly hefty fees based on a percentage of the credit generated. Recently, the IRS has turned its gaze towards applications for these credits and the accuracy of the calculations and if the taxpayer even qualified for the credit in the first place.

With all of the above going on, now is the time to have a brief discussion regarding common misconceptions about the Earned Income Retention Credit.

The Earned Income Retention Credit (ERC) is a tax credit that was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020. The credit was designed to help businesses keep employees on their payroll during the COVID-19 pandemic.

There are a number of misconceptions about the ERC. Here are a few of the most common:

  • Misconception: The ERC is available to most businesses.

Fact: The ERC is only available to businesses that have experienced a significant decline in gross receipts due to the pandemic.

  • Misconception: The ERC is only available to businesses with 500 or fewer employees.

Fact: The ERC is available to businesses of all sizes.

  • Misconception: The ERC is only available for wages paid during the first quarter of 2020.

Fact: The ERC is available for wages paid during any quarter of 2020 or 2021. However, the credit is available for the last quarter only for wages paid by a startup business as defined in Section 3134 (c) (5) of the IRS Code..

  • Misconception: The ERC is only available for employees who are working full-time.

Fact: The ERC is available for wages paid to employees who are working part-time or even if they are not working at all.

If you are a business owner, you should be aware of these misconceptions about the ERC. If you think you may be eligible for the credit, please contact us to discuss your options. For more details about the ERC and eligibility requirements, please click on the link below for an article we had written previously on ERC:

https://gallerosrobinson.com/insight-inside/qualifications-for-employee-retention-tax-credit-greatly-enhanced-for-2021/

The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.