How to Maximize Your Employee Retention Credit Claim
The Employee Retention Credit (ERC) offers a powerful way for eligible businesses to recover significant funds, but many companies fail to claim the full amount they deserve. By understanding the rules, optimizing wage calculations, and filing correctly, you can ensure you receive the largest possible refund. Here’s how to maximize your ERC claim before the filing deadlines.
Understand the ERC Basics
The Employee Retention Credit is a refundable payroll tax credit for businesses that retained employees during certain periods in 2020 and 2021. The credit is based on qualified wages and certain health plan expenses:
- For 2020: Up to $5,000 per employee for the year.
- For 2021: Up to $7,000 per employee per quarter for the first three quarters.
Knowing how these amounts are calculated is essential to maximizing your claim.
Review Every Eligible Quarter
One of the most common ways businesses miss out on the Employee Retention Credit is by not reviewing all eligible quarters. Check:
- 2020: Quarters 2, 3, and 4.
- 2021: Quarters 1, 2, and 3 (plus Q4 for recovery startup businesses).
Even if you qualify for only part of a quarter, you may still be able to claim the credit for the wages paid during that time.
Include Health Plan Expenses
The IRS allows certain employer-paid health plan costs to be included when calculating the Employee Retention Credit. Many employers overlook these expenses, leaving money on the table. Include premiums, contributions to group health plans, and other eligible benefits.
Coordinate With PPP Loan Forgiveness
If your business received a Paycheck Protection Program (PPP) loan, you can still claim the Employee Retention Credit—but you must avoid double-counting wages. The key is strategic allocation:
- Use non-ERC-eligible wages for PPP forgiveness.
- Reserve ERC-eligible wages for the credit calculation.
This coordination can increase your total relief between both programs.
Keep Detailed Documentation
To maximize your Employee Retention Credit, you must be able to prove your eligibility and calculations. Keep:
- Payroll records showing qualified wages.
- Revenue comparisons against 2019.
- Government orders that caused operational suspensions.
Detailed documentation not only protects your claim but also supports the inclusion of all eligible wages.
Use Professional Expertise
The Employee Retention Credit rules have evolved since its introduction, and many businesses rely on outdated or incomplete information. Working with a tax professional experienced in ERC filings ensures:
- All eligible wages and benefits are included.
- Calculations follow current IRS guidance.
- Filing deadlines are met for every eligible quarter.
File Before the Deadline
You can still claim the Employee Retention Credit retroactively, but the window is closing:
- 2020 claims: File by April 15, 2024.
- 2021 claims: File by April 15, 2025.
Filing as early as possible ensures you receive your refund sooner and avoid IRS backlogs.
Use Funds Strategically
Maximizing the ERC is not just about getting the largest refund—it’s about putting it to work for your business. Use the funds to:
- Strengthen cash reserves.
- Pay down debt.
- Invest in growth initiatives.
This ensures the ERC has a long-term impact on your company’s financial health.
Conclusion
The Employee Retention Credit is one of the most valuable tax incentives available to businesses, but maximizing your claim requires careful planning, accurate calculations, and complete documentation. By reviewing all eligible quarters, including health plan costs, coordinating with PPP, and filing before deadlines, you can secure the highest possible refund. Don’t leave money unclaimed—act now to get the full benefit your business deserves.
