How does an entrepreneur apply for the credit?
While every provider has a different process, when working with clients I generally take a four-step approach:
1) Conduct an in-depth analysis, usually in the form of a discovery call or meeting, to determine whether the client may qualify for the ERC;
2) Obtain and review payroll information for quarters in which the client may qualify for the ERC;
3) Calculate the potential credit and draft the required narrative to accompany the refund claim; and
4) File IRS Forms 941-X Adjusted Employer’s Quarterly Federal Tax Return for each qualifying quarter along with a narrative outlining the basis for the refund claim(s).
Once filed and if approved, the client should expect to receive their refunds in 4-6 months from the IRS, though processing times can vary. As of this writing, the deadline for filing a refund claim for the ERC is based on the statute of limitations for each originally-filed payroll tax return. However, some practitioners are concerned that legislation will be enacted to sunset the ERC more quickly, similar to the early closure of the PPP loan program. If that occurs, entrepreneurs who fail to timely file refund claims may miss out on a significant opportunity.