Everything You Need To Know About ERC Tax Credits

ERC tax credits were an important part of any business in the wake of COVID-19. These were exceptional times and for many businesses, a financial hardship that many struggled with, some ending up going bankrupt. 

With ERC tax credits, it’s important to be aware of the benefits they bring and what delays are expected currently in 2024.

What are ERC tax credits?

In the early months of 2020, the COVID-19 pandemic was creating real problems for businesses across America. As the first wave of COVID-19 took place, it shuttered over 700,000 businesses. Congress took action and introduced what is called the Employee Retention Credit Program – aka ERC.

The Employee Retention Credit is a refundable tax credit that’s available to eligible businesses and those who are tax-exempt. Those that were affected during the COVID-19 pandemic whereby their employees were impacted.

The benefits of ERC tax credits for your business

What are the benefits of having ERC tax credits for your business? The primary benefit of ERC is that it helps businesses retain their employees. During COVID-19, this was a necessity to ensure staff could be kept on without needing to worry about potentially losing the employees due to financial losses.

It provides financial relief and for many, it’s one less financial problem to worry about in the aftermath of the pandemic. The pandemic is certainly continuing to damage businesses and it will take some time to recover from it.

Other benefits that come from ERC tax credits are that they help boost cash flow and reduce the tax liability that many businesses will face when filing their tax returns for the year.

One of the great benefits of ERC tax credits is that they increase the eligibility for other relief programs. That might be needed for your business this year.

Current extended wait times for claiming ERC tax credits in 2024

Many businesses who submitted their ERC claims are still waiting for their credit to be given as of early 2024. Why is this?

The IRS announced that it had paused the ERC until the year’s end in order to help combat the rise in fraud and to protect small businesses from scams. There were concerns that ineligible claims were being filed and therefore it created a backlog in submissions. 

What does that mean for those waiting for their ERC tax credits to be awarded? Businesses should expect longer review times as a result of fraud prevention. As a timeframe, you can expect to usually wait 60 to 90 days before the credits are awarded.

Now due to the delay, there are some businesses who are and have been waiting up to 12 months. These businesses are those that submitted prior to the slowdown so it might be that it will take some time before the credits are eventually awarded.

It’s worth chasing your submission as a business to see how long you can expect to wait and while it is paused, pursuing your submission may help speed things along for you.