As a business owner or ERC Advisor, it’s important to understand the nuances of the Employee Retention Credit (ERC) to ensure that you’re taking advantage of all available tax credits. Unfortunately, many businesses make costly mistakes when it comes to the ERC, leading to missed opportunities and unnecessary financial burden.
Understanding Top Ten Mistakes of Business Owners and Their ERC Advisors
At ERC Advisors Reviews, we understand the importance of maximizing tax credits while avoiding common pitfalls. That’s why we’ve compiled a list of the top 10 mistakes that business owners and advisors make when it comes to the ERC.
Mistake #1: Failing to Understand Eligibility Requirements
The ERC is available to businesses that have experienced significant declines in revenue due to the pandemic. However, there are specific eligibility requirements that must be met in order to qualify for the credit. It’s important to understand these requirements in order to determine whether your business is eligible.
Mistake #2: Overlooking the Impact of PPP Loans
Businesses that received Paycheck Protection Program (PPP) loans may still be eligible for the ERC, but the interaction between the two can be complex. Failing to account for the impact of PPP loans on the ERC can result in missed opportunities for tax savings.
Mistake #3: Failing to Properly Document Eligibility
Even if your business meets the eligibility requirements for the ERC, it’s important to properly document your eligibility in order to claim the credit. Failing to do so can result in IRS audits and penalties.
Mistake #4: Not Taking Advantage of Retroactive Changes
The ERC has undergone numerous retroactive changes since its inception. Failing to take advantage of these changes can result in missed opportunities for tax savings.
Mistake #5: Failing to Understand the Credit Calculation
Calculating the ERC can be complex, and there are many factors that can impact the amount of the credit. It’s important to understand how the credit is calculated in order to maximize tax savings.
Mistake #6: Not Considering the Impact of State Taxes
While the ERC is a federal tax credit, it can also impact state taxes. Failing to consider the impact of the credit on state taxes can result in missed opportunities for tax savings.
Mistake #7: Not Understanding the Interaction with Other Credits
The ERC may interact with other tax credits, such as the Work Opportunity Tax Credit (WOTC). Failing to understand these interactions can result in missed opportunities for tax savings.
Mistake #8: Failing to Account for Changes in Employee Count
The ERC is based, in part, on the number of employees a business has. Failing to account for changes in employee count can result in missed opportunities for tax savings.
Mistake #9: Not Working with a Qualified Advisor
The ERC is complex, and it’s important to work with a qualified advisor who can help you navigate the nuances of the credit. Failing to work with a qualified advisor can result in missed opportunities for tax savings.
Mistake #10: Waiting Too Long to Take Action
The ERC is a time-sensitive credit, and waiting too long to take action can result in missed opportunities for tax savings. It’s important to act quickly in order to take advantage of the credit.
Understanding the nuances of the Employee Retention Credit is essential for maximizing tax savings while avoiding costly mistakes. By avoiding the top 10 mistakes outlined above, businesses can ensure that they’re taking advantage of all available tax credits. For more information on the ERC and how ERC Advisors Reviews can help you navigate its complexities, please contact us today.