Independent hardware and home improvement retailers may still qualify for the Employee Retention Credit (ERC) and file ERC claims for 2020 and 2021. The deadline for ERC claims for all quarters in 2020 is April 15, 2024. For all quarters in 2021, ERC claims must be filed by April 15, 2025.
The Employee Retention Credit (ERC) is a refundable tax credit designed for businesses that faced challenges due to the COVID-19 pandemic. It is available for employers who continued to pay employees while either shut down due to the COVID-19 pandemic or experienced substantial declines in gross receipts between March 13, 2020, and December 31, 2021.
Eligible employers can claim the ERC on their original or adjusted employment tax return for any applicable period within this timeframe. This credit serves as a financial support mechanism to assist businesses who retained their employees during these challenging times.
During the year 2020, businesses had the potential to receive up to $5,000 per employee, while in 2021, the credit amount increased to $7,000 per employee per quarter. These substantial figures underscore the extensive support available through the ERC.
Consulting the latest IRS policies is advisable for businesses uncertain about their eligibility.
Beware of ERC Scam Promotions
Employers should be wary of ERC advertisements that advise them to “apply” for money by claiming the ERC when they may not qualify. Anyone who improperly claims the credit has to pay it back and may owe penalties and interest. The only way to claim the ERC is on a federal employment tax return.
The ads are all over radio, TV and social media. You may even get ads that look like official government letters, or texts, emails and phone calls advertising ERC eligibility.
Warning signs of aggressive ERC marketing
The Employee Retention Credit is a complex credit that requires careful review before applying, so be wary of:
- Unsolicited ads, calls, emails or texts from someone you don’t know.
- Statements that the promoter or company can determine your ERC eligibility within minutes.
- Large upfront fees to claim the credit.
- Fees based on a percentage of the refund amount of Employee Retention Credit claimed – you should always avoid a tax preparer basing their fee on the amount of the refund.
- Statements from the promoter that you qualify for the credit before any discussion about your tax situation.
- Statements from the promoter urging you submit the claim because there is nothing to lose. In reality, those improperly receiving the credit could have to repay the credit – along with substantial interest and penalties.
These promoters may lie about eligibility requirements. In addition, those using these companies could be at risk of someone using the credit as a ploy to steal the taxpayer’s identity or take a cut of the taxpayer’s improperly claimed credit.
For details about ERC scams, see News Release IR-2023-105, IRS alerts businesses, tax-exempt groups of warning signs for misleading Employee Retention scams; simple steps can avoid improperly filing claims
The credit is available to eligible employers that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022. Eligibility and credit amount vary depending on when the business impacts occurred. The ERC is not available to individuals.
Generally, businesses and tax-exempt organizations that qualify are those that:
- Were shut down by a government order due to the COVID-19 pandemic during 2020 or the first three calendar quarters of 2021, or
- Experienced the required decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters of 2021, or
- Qualified as a recovery startup business for the third or fourth quarters of 2021
- Eligible employers must have paid qualified wages to claim the credit.
- Eligible employers can claim the ERC on an original or adjusted employment tax return for a period within those dates.
For more information about eligibility and credit amounts, see the Employee Retention Credit – 2020 vs 2021 Comparison Chart.
For more details, see Frequently asked questions about the Employee Retention Credit.
Certain limitations apply to the ERC. For example, employers can’t claim the ERC on wages that were reported as payroll costs for Paycheck Protection Program loan forgiveness. Qualified wages for purposes of the ERC do not include payroll costs in connection with shuttered venue operators grants or restaurant revitalization grants.