The IRS allowed for certain advance payments during the COVID-19 pandemic using Form 7200. However, it stopped accepting Form 7200 after January 31, 2022.
Since businesses could no longer receive advance payments from the IRS, private lenders and some hedge funds began to offer advances for employee credits.
Qualifying wages depend on the average number of employees in 2019.
Qualifying Wages 2020
If a business averaged under 100 employees during 2019, it could claim the ERC for all employees, whether they were working or not. If a business averaged over 100 employees in 2019, it could only claim wages for employees who didn’t work or provide services (i.e. on furlough or some other form of suspension from work duties).
Qualifying Wages 2021
If a businesses averaged 500 or more employees in 2019, it could only claim the ERC for qualified wages paid to employees who didn’t work during the qualifying period. If a business averaged fewer than 500 employees in 2019, it could claim the ERC for all employees, whether working or not.
Employee Retention Credits are sometimes called “America’s best kept secret.” That’s because Paycheck Protection Program (PPP) loans got most of the attention from business owners. ERC was the lesser known option. Per the National Federation of Independent Business (NFIB), only 4% of small business owners are familiar with this program.
However, now that PPP loans have expired, and recent legislation allows businesses that received PPP loans to also file for ERC, more companies are applying for the credit. As a result, the IRS has a backlog of requests, which has prolonged the turnaround time.
Everyday more and more business are applying for ERC, which will increase IRS processing time. Also filing errors are causing delays. For example, if you forgot to deduct PPP loan forgiveness, it can take more than 12 months to correct the filing and receive your money.
