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(ERC) in 2024: What Small Businesses Need to Know

#ERC2024 #SmallBusinessSupport #ERCClaimWithdrawal #ProtectAgainstFraud

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The Employment Retention Credit (ERC) is a crucial incentive for small businesses, designed to support them in keeping their employees during challenging times. The ERC is a refundable tax credit that can be claimed by eligible employers who have experienced a significant decline in gross receipts or a full or partial suspension of operations due to COVID-19.

Overview of the Employment Retention Credit

The ERC was initially implemented in response to the COVID-19 pandemic to help small businesses retain their workforce. It provides a tax credit to eligible employers who continue to pay wages to employees despite experiencing hardship. This incentive plays a vital role in supporting businesses and their employees during times of economic uncertainty.

In 2020, the credit was equal to $5,000 per employee per year. In 2021 the credit limit was increased to $7,000 per employee per quarter for three quarters.

New Updates to the Employment Retention Credit in 2024

On July 20, 2023, the IRS determined that a supply chain reduction is not necessarily a qualifying suspension of business.

If during a supply chain disruption, a business operations is able to continue, then it is most likely eligible for the ERC. Employers must show they’ve been impacted by way of legal statute, rule, order or regulation as it pertains to supply chain disruptions.

The IRS ceases the processing of new claims in 2024 due to high levels of fraud

The IRS will not process any new claims for the Employee Retention Credit in 2024. This is due to the high levels of fraud detected by the agency. The IRS will continue to process existing claims extending the processing time to 180 days.

The ERC Withdrawal program is now available to taxpayers who previously took the credit in error.

If the taxpayer did not receive a check or if a check was received and not cashed, the taxpayer can withdraw the entirety of the claim without a tax, penalty or interest being accessed. The IRS has announced that it will be sending out letters to employers who have claimed the Employee Retention Credit in error. The letters will inform them of their mistake and provide instructions on how to return any funds that were received. A taxpayer may also withdrawal when under audit but no auditor has been assigned.

Click here for more information on ERC withdrawal.

Conclusion

In summary, the new updates to the ERC in 2024 aim to further crack down on fraudulent activity. Staying informed about these updates is crucial for ensuring tax compliance as a business owner. Stay tuned for further developments in this area and continue to leverage the ERC for the benefit of your business and employees.