Employee Retention Credits (ERC) have provided a vital source of financial relief for businesses that kept employees on payroll during difficult economic periods. Even though the program has officially ended for new wage periods, many companies still have the opportunity to claim substantial refunds—if they act before the deadlines. Understanding how to secure Employee Retention Credits now can mean the difference between recovering thousands of dollars or missing out entirely.
Understanding Employee Retention Credits
Employee Retention Credits are refundable payroll tax credits designed to reward businesses for retaining their staff during times of financial hardship. Unlike loans, these credits do not need to be repaid, and they can deliver significant cash back directly to your business. The amount you receive is based on qualified wages and certain health plan expenses paid to employees during eligible periods.
Why Employee Retention Credits Matter in 2025
Although the qualifying wage periods have ended, the statute of limitations for filing claims is still open. That means in 2025, you may still be able to amend past payroll tax returns and receive your refund.
Eligibility for Employee Retention Credits
To secure Employee Retention Credits, your business must meet one of the following conditions for each eligible quarter:
- Full or Partial Suspension: A government order forced your business to close or reduce operations.
- Revenue Decline: You experienced a significant drop in gross receipts compared to the same quarter in 2019.
PPP Loan Considerations
Some business owners mistakenly believe they cannot claim Employee Retention Credits if they took a Paycheck Protection Program loan. The truth is you can claim both, but not for the same wages.
Calculating Employee Retention Credits
Calculating Employee Retention Credits correctly is crucial to maximizing your refund. For 2020, the credit was 50% of qualified wages up to $10,000 per employee annually. For 2021, it increased to 70% of qualified wages up to $10,000 per employee per quarter.
Factors That Affect the Calculation
- The number of full-time employees you had in 2019
- Eligible quarters based on shutdown orders or revenue drops
- Inclusion of employer-paid health plan costs
- Proper allocation of wages between PPP forgiveness and ERC
How to File for Employee Retention Credits
Claiming Employee Retention Credits requires filing an amended Form 941-X for each eligible quarter. Documentation is essential—you need to provide records proving both eligibility and wage calculations.
Steps to Secure Your Credits Before the Deadline
- Review Eligibility: Determine which quarters qualify.
- Calculate Your Credit: Ensure accurate inclusion of wages and health plan expenses.
- Prepare Documentation: Keep detailed records in case of an IRS review.
- File Promptly: Submit your amended returns before the statute of limitations expires.
Common Filing Mistakes to Avoid
When filing for Employee Retention Credits, avoid these costly errors:
- Not including all eligible quarters
- Failing to count qualified health plan expenses
- Overlooking wage allocation rules with PPP loans
- Waiting too long to file and missing the deadline
Important Deadlines for Employee Retention Credits
The IRS generally allows up to three years from the original filing date to amend payroll tax returns. This means the window for 2020 ERC claims will close in 2024 or early 2025, depending on the quarter. For 2021 claims, the deadline extends into 2025 and 2026. Acting early ensures you avoid last-minute errors and processing delays.
Working With ERC Specialists
Navigating the complexities of Employee Retention Credits can be challenging, especially with changing IRS guidance. Partnering with professionals ensures you identify all eligible wages, file correctly, and avoid costly mistakes that could reduce your refund or trigger an audit.
Conclusion
Employee Retention Credits remain one of the most valuable financial tools available to eligible businesses—even years after the qualifying periods ended. Acting before deadlines is critical to securing the refunds you deserve. At [PURCHASE TAX CREDITS], we specialize in helping businesses navigate the ERC process, from eligibility checks to filing complete and accurate claims. Don’t wait until it’s too late—secure your Employee Retention Credits now and give your business the financial boost it needs to grow.
