6 Myths About ERC Tax Credits & The Truth Behind Them

Ever since federal lawmakers passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March, 2020 there have been a lot of myths about who can make an ERC tax credit claim and what qualifies. They range from being able to apply if you had a PPP loan and needing to have taken a financial loss in order to make your ERC claim.

As a leading ERC specialist, we've heard it all. And because we have a 100% success rate with getting our clients their ERC tax credits, we're ready to share what is and is not true so you can determine if the ERC tax credit applies to your situation. And our in-house team of accounts are also here to answer your questions. Here's the top six ERC myths we hear, and the truth behind them.

Myth #1: You Cannot Get the ERC If You Got a PPP Loan

False, you can still get the ERC if you got a PPP loan. You can also file for the ERC even if your company never applied for PPP benefits. The PPP and the ERC are separate economic relief measures even though they sound similar. Having claimed and gotten a PPP loan does not prevent you from getting your ERC tax credit.

Myth #2: A Business Must Have Been Completely Shut Down to Qualify for the ERC

False. You can qualify for the Employee Retention Credit on the basis of a government shutdown order—but it certainly does not have to be a full shutdown. Partial shutdowns—from cleaning and sanitizing to social distancing to capacity reductions —also count. Virtually every company in the country can qualify for the ERC with us as we have the government orders. 

Myth #3: A Company Cannot File for the ERC If it Was In Losses (No Tax Liability) 

False as the ERC tax credit is not dependent on your tax liabilities and losses. The ERC is a fully refundable tax credit on employment taxes paid during the final three quarters of 2020 and the first three quarters of 2021. A company can qualify for the ERC even if it lost money during a tax year and did not have business tax liability on its profits. 

Myth #4: The ERC is Not Valuable Enough to Be Worth Filing for

False. The ERC can provide even greater financial benefits than PPP. In fact, a company may qualify for three to seven times as much in ERC funds as it did in PPP funds. There is a maximum benefit available of up to $26,000 per employee when adding up all six quarters, so add this into how many W2 employees you had during the time frame. 

Myth #5: Non-Profit Organizations Cannot Qualify for the ERC

False. Non-profits can and do qualify for ERC tax credits and many should apply as non-profits have employees just like for profit companies and organizations.

Myth #6: It is Too Late to File for the ERC

False. Businesses can still claim the ERC for 2020 or for 2021 in 2022 through an amended return. If you have questions about doing this, a licensed CPA will be able to help, and if you use an ERC tax credit company like ours, your representative will be a full-time CPA that specializes in these claims and able to answer your questions.

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There's a lot of confusion around who qualifies and does not qualify for ERC tax credits. If you have more questions, or want to apply for yours, call us at 312-883-1888 or connect with us directly online today. It's a no-risk and hassle-free way to talk to an expert who will separate fact from fiction, and if you choose to apply, be there to help every step of the way.