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Top 6 myths about the Employee Retention Credit



Photo by Remy Gieling

As a small business owner, how much do you know about the Employee Retention Credit (ERC)? It’s a payroll tax refund from the government that’s offered to businesses that kept employees on payroll during COVID-19. With the ERC, eligible companies have the opportunity to get up to $26,000 per employee.

This opportunity has huge potential for many local businesses, however, there’s been a lot of misinformation about the ERC, causing some companies to lose out on impactful capital for their business. Let’s debunk common myths about the ERC so your business doesn’t leave any money on the table.

Myth #1: My business received a Paycheck Protection Program (PPP) loan, so it doesn’t qualify

The Relief Act in December 2020 changed the rule that disqualified companies that received a PPP loan from obtaining the ERC. Now, your business could be eligible for the ERC, even if it collected PPP loans.

Myth #2: My company doesn’t meet government shutdown requirements

When you think about a shutdown, you may assume this means a company closed down completely. But that’s not necessarily the case. The IRS has kept the definition of a government shutdown fairly open, allowing room for varying situations. Depending on your business’s operations during COVID-19, it may qualify for shutdown requirements, making it potentially eligible for the ERC.

Myth #3: My business’ sales have increased since COVID-19, so it isn’t eligible

A revenue increase during 2020 and 2021 doesn’t automatically disqualify your business. Even if your company’s revenue increased during COVID, it could still be eligible to receive the ERC if it experienced commerce, group meeting, and/or business travel limitations or was subject to a partial or full suspension due to a COVID-19 government order.

Myth #4: My organization is a nonprofit, so it can’t receive the ERC

Charities can benefit from the ERC too! From suspended operations to limited commerce, travel, or group meetings due to the pandemic, tax-exempt organizations may also qualify for a payroll tax refund.

Myth #5: It’s too late for my company to claim the ERC

Your business can still file a claim to receive the ER, but the clock is ticking, so it’s important for companies to jump on the opportunity now as the ERC landscape could change at any time. Fortunately, there are many ERC companies with highly qualified professionals who are skilled in the ERC’s nuances, which can help your business navigate the process as easily as possible. 

Myth #6: My CPA said that my business isn’t eligible for the ERC

Even if your CPA says your company doesn’t qualify for the ERC, it still may. An ERC company that’s well-versed in the current eligibility requirements can help make sure your business doesn’t miss out on potential funds. 


About the author

Howard Makler is the co-founder and CEO of Innovation Refunds, a team of highly qualified tax attorneys and CPAs who have helped more than 10,000 companies receive over $2 billion in ERC refunds. Innovation Refunds’ value is derived from its extended network of enterprise partners, financial institutions, cutting-edge technology resources, and trusted advisors.

ERC refund professionals like Innovation Refunds make the ERC process simpler for business owners. Starting with an approximately eight-minute survey, Innovation Refunds’ advanced software determines your business’s eligibility for an ERC refund. The team of professionals then estimates your company’s potential refund with no upfront cost. From there, you can choose to have Innovation Refunds submit all the necessary paperwork. Once your refund is accepted and funds arrive at your business, Innovation Refunds takes a commission.

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The information above is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your circumstances. Unless stated otherwise, references to third-party links, services, or products do not constitute endorsement by Yelp.

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