Claiming Employee Retention Credits (ERC) can unlock significant refunds for eligible businesses, but the process is more complex than it appears. While the basic steps are straightforward—determine eligibility, calculate credits, file amended payroll returns—small details can make a big difference in the outcome. By applying insider filing tips, you can increase your chances of securing the maximum possible refund while avoiding delays or rejections.
Why Filing Employee Retention Credits Requires Strategy
Employee Retention Credits are a refundable payroll tax credit available to businesses that retained employees during certain periods in 2020 and 2021. Since the IRS is still accepting retroactive claims, there’s a window of opportunity—but also a higher level of scrutiny. Strategic filing ensures you meet all requirements and optimize your claim.
Insider Tips for Filing Employee Retention Credits
1. Use Both Eligibility Paths
Many businesses focus solely on the revenue decline test. However, the government order test often allows companies to qualify even if revenues didn’t drop enough. Document partial suspensions, supply chain disruptions, or capacity restrictions to maximize your eligibility.
2. Optimize Wage Allocation With PPP
If you also received PPP loans, you cannot use the same wages for both PPP forgiveness and ERC. Assign higher-wage periods or non-payroll expenses to PPP to free up more wages for Employee Retention Credits.
3. Capture All Eligible Health Plan Costs
ERC allows you to include certain employer-paid health plan expenses, even if employees weren’t actively working. This often increases the total refund but is overlooked by many filers.
4. Amend All Eligible Quarters at Once
Instead of filing for one quarter and waiting, consider submitting all eligible quarters together. This can help streamline IRS processing and get your total refund sooner.
5. Keep Detailed, Organized Documentation
Maintain records of:
- Revenue comparisons by quarter.
- Payroll data with clear breakdowns.
- Copies of government orders or mandates affecting your business.
Having this ready can speed up the process if the IRS requests additional information.
6. Double-Check Calculations Before Filing
Even minor math errors can slow approval or reduce your refund. Review your numbers carefully or have a second person verify them before submission.
7. Monitor IRS Processing Times
ERC refunds can take months to process. Keep a log of submission dates and follow up periodically. If delays occur, be ready to provide additional documentation.
Common Mistakes Even Experienced Filers Make
- Overlooking smaller eligible quarters.
- Forgetting to include part-time or tipped employees.
- Not claiming health benefits as part of qualified wages.
- Misinterpreting government order language.
Avoiding these missteps can mean a difference of thousands in your final refund.
Why Professional Help Can Pay Off
ERC rules are detailed, and mistakes can be costly. Working with a tax professional experienced in Employee Retention Credits can uncover additional qualifying wages, ensure compliance, and save time. Many businesses discover that expert assistance increases their total refund significantly.
Conclusion
Filing for Employee Retention Credits is more than just submitting forms—it’s a strategic process that can unlock substantial funds for your business. By leveraging both eligibility paths, maximizing wage allocation, including all qualifying expenses, and keeping impeccable records, you can file with confidence and get the most from your claim. With these insider tips, you’ll be positioned to capture the full value of Employee Retention Credits before the filing window closes.
