If you only get your financial news from the press then you may be missing out on some amazing opportunities! For some reason, the employee retention tax credit (ERTC) doesn’t get much in the way of publicity despite being an amazing aid package for many businesses during these chaotic times. With many businesses still recovering, or even still suffering, from the COVID-19 pandemic, most businesses would welcome any assistance that they can find.
Ignorance and misinformation plague the ERTC making forcing many companies who should qualify to avoid even trying. Like most things related to the IRS, there are miles of red tape and over 200 pages of guidelines and guidance. In order to help you navigate all of this, we will be working through some frequently asked questions to help you stay informed!
When will I get paid?
Once companies realize that they probably do qualify for the ERTC, one of the most common questions they have is how quickly they can get their money! This is a perfectly reasonable question, so let’s look a little at the process and talk through the slightly complicated answer.
The short answer; it depends. As with anything government-related, there are always going to be exceptions and caveats that make it difficult to give a very straightforward answer. One of the primary drivers behind the timetable being flexible is that there are different processes depending on your qualifier and which periods you are applying for.
Let’s go back in time
The most common path we take to capture these credits for businesses is by using an amended 941/941x form. This route is used when we need to go back in time and capture tax credits that were missed in previous periods.
The frustrating part about this method is that it is incredibly manual. In these instances, the form is actually printed and signed, and then sent via certified mail to the IRS. Once the IRS receives it, they have to open the envelope, take the physical form and scan it into their computer system. Once it has been processed and approved, they have to cut a physical check that they will mail back to you after verifying the address on file matches the one on the 941; which is another layer of complexity and possible confusion.
If it isn’t already obvious, this is an incredibly manual process. While the IRS is doing their best to stay on top of it, they have had to continually push back their deadlines. In the beginning of the year, the expected turnaround on an amended 941/941x was 3-4 months. Going into the second quarter their response was that it could take up to 6 months. By the third quarter, they were estimating it could take 9 months – 1 year to process the same form!
Living in the moment
The next most common path to getting paid is to incorporate the current quarter’s credits into the 941. The great thing about this route is that because you aren’t amending previous quarters, it can be done electronically. Removing physical mail from the equation goes a long way in expediting the process. To speed the process up even further you can use an electronic payment provider to avoid having a physical check mailed to you. This process can get the timeframe down to 8-10 weeks.
Looking to the future
A less common option is to actually file for an advance using form 7200. This allows businesses to file for the ERTC in advance of the end of the quarter and can be faxed in. These forms are supposed to take 4-6 weeks to process; however, we have seen significant delays from the IRS when it comes to this process. Far too often glitches in the IRS system/process have caused them to not be able to get to these forms before the end of the quarter.
If you plan on taking the form 7200 path, I would highly recommend getting it faxed in as early in the quarter as possible!
These are the three most common ways of taking advantage of the ERTC and getting paid. While form 7200 has the theoretical fastest turnaround time, it has had significant problems from a process standpoint within the IRS.
Don’t try to tackle this project alone, reach out and let us give you a hand! We can guide you through the process, help you document everything, and find the quickest path to getting money in your bank account!
For a layman’s guide to the employee retention tax credit check out our roadmap below:
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