ERC Filing Deadline: Everything You Need to Know to Stay Ahead

Navigate the complexities of the ERC Filing Deadline with ease, ensuring your business stays ahead with our comprehensive guide packed with critical insights and practical tips!

Hannah Avery

Sep 6, 2023 — 6 min read

The Employee Retention Credit deadline is a crucial milestone for businesses seeking to capitalize on this tax credit program. Instituted as a response to the COVID-19 pandemic, the ERC offers significant financial relief to companies that retained their employees during the crisis. Timely and accurate filing is essential to ensure compliance and maximize the program's potential economic benefits. Understanding the filing process and requirements becomes a top priority for businesses aiming to leverage this opportunity as the deadline approaches.

Changes to the Employee Retention Tax Credit

In the wake of the COVID-19 pandemic, the Employee Retention Tax Credit underwent significant changes designed to provide more substantial relief to businesses and encourage workforce stability. Initially established under the CARES Act of 2020, the credit's scope was greatly expanded by the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021.

These changes included a substantial increase in the credit percentage from 50% to 70% of paid qualified wages, and the eligible wage cap was raised from $10,000 per year to $10,000 per quarter. Additionally, eligibility criteria were broadened to include businesses experiencing a decline in gross receipts of just 20%, compared to the initial threshold of 50%. Furthermore, the American Rescue Plan extended the credit availability through December 31, 2021, offering businesses additional time to navigate the economic impact of the pandemic.

These updates significantly augmented the reach and potential benefits of the Employee Retention Tax Credit, providing a more robust support system for businesses striving to retain their workforce throughout the turbulent times brought on by the pandemic.

Understanding the ERC Deadlines

Comprehending the ERC filing deadline is vital to maximizing your tax credit and ensuring your business remains compliant. The filing deadlines are typically tied to the federal employment tax return deadlines, as the Employee Retention Credit is primarily claimed on the quarterly employment tax returns. Form 941, Employer's Quarterly Federal Tax Return, is the most prevalent form.

The general rule is that employers must file their returns by the last day of the month following the quarter's end. This means the deadlines fall on April 30, July 31, October 31, and January 31 for the 1st, 2nd, 3rd, and 4th quarters, respectively. However, businesses get an extra day or two to file if the ERC deadline falls on a weekend or legal holiday.

It's also crucial to note that if you discover you are eligible for more ERC than you initially claimed, you can amend your returns for a refund within three years of the original filing deadline. This is done using Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund.

With these key dates, you can plan your filing schedule and ensure you leverage the Employee Retention Credit to its full potential. Remember, timely and accurate filing is vital to reaping the benefits of ERC refundable tax credit.

ERC Claims Filing Deadlines in 2024 and 2025

As we look to the future, it's essential to mark two key dates on your calendar - April 15, 2024, and April 15, 2025. These dates represent the annual filing deadlines for the Employee Retention Credit for the respective years.

The ERC Filing Deadline on April 15, 2024

The April 15, 2024, deadline pertains to the tax year 2023. Eligible businesses, particularly those continuing to grapple with the economic impact of the pandemic, should utilize this opportunity to claim any eligible ERC from 2023. Remember that a decrease in gross receipts of 20% or more or a full or partial shutdown due to a governmental order makes you eligible for the ERC. Ensure your financial and payroll records for 2023 are in order and that the qualifying events and qualified wages are accurately documented. This will streamline the filing process and help you maximize your credit.

The ERC Filing Deadline on April 15, 2025

The April 15, 2025, deadline applies to the tax year 2024. It's crucial to note that while the ERC program was initially extended through December 31, 2021, eligible employers may still file for the ERC in 2024 for any eligible quarters in 2021. This opens up an opportunity for companies that may need to pay more attention to their eligibility for credit in the past. If required, take the time to reassess your 2021 records and consult with a tax professional. The extra effort could lead to substantial financial relief for your business.

These deadlines follow the traditional tax filing calendar, falling on April 15. However, should these dates land on a weekend or holiday, the deadline will be extended to the following business day. Accurate and timely filing is vital to fully benefiting from the ERC. Stay ahead of the game by marking these dates and preparing in advance.

Eligibility Requirements for the Employee Retention Credit

Below are the ERC eligibility requirements:

Requirement 1: Employment Status

The Employee Retention Credit (ERC) applies to businesses with employees. Sole Proprietors, independent contractors, and self-employed individuals are not eligible for the ERC.

Requirement 2: Suspension of Operations

Businesses that had to fully or partially suspend operations due to a government order related to COVID-19 are eligible for the ERC refund.

Requirement 3: Significant Decline in Gross Receipts

To qualify for the ERC, businesses must demonstrate a significant decline in gross receipts. This is defined as a drop in gross receipts of more than 20% in a quarter compared to the same quarter in 2019.

Requirement 4: Non-PPP Recipients

Businesses that received a Paycheck Protection Program (PPP) loan are not eligible for the ERC. These two forms of federal aid are mutually exclusive.

Requirement 5: Full-Time Equivalent Employees

For 2020, businesses with 100 or fewer full-time equivalent employees are eligible for the ERC. For 2021, the threshold increased to 500 or fewer full-time equivalent employees.

Requirement 6: U.S.-Based Businesses

Only businesses based in the United States are eligible for the ERC. This includes U.S. territories.

Remember, fulfilling these requirements does not guarantee receipt of the ERC, as the credits are subject to Internal Revenue Service (IRS) review and validation. Therefore, businesses must maintain accurate and comprehensive records of their operations, wages, and gross receipts.

How to Calculate the Employee Retention Credit

Calculating the Employee Retention Credit

The calculation of the Employee Retention Credit (ERC) involves multiple steps and varies based on the year in question due to changes in the legislation.

Calculating ERC for 2020

In 2020, the ERC equals 50% of qualified wages paid to an employee, up to a maximum of $10,000 in wages per employee for the entire year. Consequently, the maximum credit per employee for 2020 is $5,000.

Here's the step-by-step process:

Identify all eligible employees.
Ascertain the total qualifying wages paid to each employee during eligible quarters.
If an employee's qualifying wages exceed $10,000, limit the wage amount to $10,000.
Multiply the eligible wage amount by 50% to determine the ERC for each employee.
Sum up the ERC for all employees to calculate the total ERC 2020.

Calculating ERC for 2021

For 2021, the ERC was expanded, and the credit is equal to 70% of qualifying wages, up to a maximum of $10,000 in wages per employee per quarter. Therefore, the maximum credit can be $7,000 per employee per quarter, totaling up to $28,000 per employee for the entire year if the business qualifies in all four quarters.