As a small business owner, you're always looking for ways to maximize your profits and minimize your expenses. And during these challenging times, you need every advantage you can get. That's why it's essential to take advantage of the Employee Retention Credit (ERC) program – a valuable tax credit that can save your business thousands of dollars. In this post, we'll explore the benefits of claiming the ERC tax credit and why it's worth your time to investigate if your business qualifies.
What is the Employee Retention Credit (ERC)?
The ERC is a tax credit that was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and expanded by the Consolidated Appropriations Act of 2021. The ERC is designed to help small businesses that have been adversely affected by the pandemic by providing a tax credit to offset some of the costs associated with retaining employees.
The ERC is available to eligible employers who retained employees during the COVID-19 pandemic and who experienced either a full or partial suspension of their business operations or a significant decline in gross receipts. The credit is worth up to $7,000 per employee per quarter, and it's available through the end of 2021.
Click here to see if you qualify for your ERC tax credit
What are the benefits of claiming the ERC tax credit?
Increased cash flow
Small businesses that claim the ERC tax credit can use the money to invest in their business, pay bills, or keep their employees on payroll. This can help increase cash flow, reduce debt, and improve financial stability.
According to the National Small Business Association, cash flow is the most significant financial challenge for small businesses. With limited financial resources, small businesses often struggle to manage their cash flow, pay their bills on time, and keep their employees on payroll. By claiming the ERC tax credit, small businesses can improve their cash flow and reduce the financial stress that comes with running a small business.
Reduced tax liability
Claiming the ERC tax credit can significantly reduce a small business's tax liability. For example, if you qualify for the maximum credit of $7,000 per employee per quarter and you have ten employees, you could save up to $280,000 on your tax bill.
According to the Small Business Administration, taxes are one of the most significant expenses for small businesses. By claiming the ERC tax credit, small businesses can reduce their tax liability, which can free up funds to invest in their business or pay off debt.
Boosted employee morale
By claiming the ERC tax credit and keeping your employees on payroll, you're showing your commitment to your team's well-being. This can boost morale and help you retain talented employees, which can be challenging during times of economic uncertainty.
According to a study by Glassdoor, employee morale is directly linked to employee retention. When employees are happy and engaged, they're more likely to stay with their employer and perform at a high level. By claiming the ERC tax credit and keeping your employees on payroll, you're demonstrating your commitment to your team's well-being, which can help improve employee morale and reduce turnover.
Improved competitiveness
Small businesses that claim the ERC tax credit can use the money to invest in their business, improve their products or services, and compete more effectively in their industry. This can help them gain a competitive advantage and grow their business over the long term.
According to the Small Business Administration, competition is one of the most significant challenges for small businesses. By investing in their business and improving their
Click here to see if you qualify for your ERC tax credit
Reduced risk of audits
Small businesses that claim the ERC tax credit can reduce their risk of audits by ensuring they're in compliance with IRS regulations. The IRS has stated that businesses that claim the ERC tax credit may be subject to audits, but those that do so correctly and can provide documentation to support their claims are less likely to be audited.
More financial resources for growth
By claiming the ERC tax credit, small businesses can free up financial resources that can be used to grow their business. This can include investing in new equipment or technology, expanding their product lines, or hiring additional employees. These investments can help small businesses increase their revenue and profitability over the long term.
According to a report by the National Federation of Independent Business, 25% of small businesses reported that access to capital was their top business problem in 2020. By claiming the ERC tax credit, small businesses can free up financial resources that can be used to address this challenge and fuel growth.
Increased flexibility in managing your business
By claiming the ERC tax credit, small businesses can increase their flexibility in managing their business. For example, they may be able to offer more flexible work arrangements to their employees, such as remote work or flexible schedules. This can help small businesses attract and retain top talent, which is critical for their long-term success.
According to a survey by Small Business Majority, 51% of small business owners reported that finding and retaining talented employees was a top challenge in 2020. By offering more flexible work arrangements, small businesses can differentiate themselves from their competitors and attract top talent.
Conclusion
In addition to working with a tax professional, small business owners can also take advantage of other resources to help them navigate the ERC tax credit program. For example, the Small Business Administration (SBA) offers free counseling and training services to small businesses through its network of Small Business Development Centers (SBDCs) and SCORE Mentors. These services can help small business owners understand the eligibility requirements for the ERC tax credit, navigate the application process, and develop a plan for maximizing the benefits of the program.
Click here to see if you qualify for your ERC tax credit
It's also worth noting that the ERC tax credit is just one of several valuable tax credits available to small businesses. Other programs, such as the Small Business Health Care Tax Credit and the Research and Development Tax Credit, can also help small businesses reduce their tax liability and free up financial resources for growth. By working with a tax professional and exploring all available tax credit programs, small business owners can maximize their savings and position their business for long-term success.
the ERC tax credit is a valuable program that can provide significant benefits to small businesses. By taking advantage of this program, small business owners can increase their cash flow, reduce their tax liability, boost employee morale, improve competitiveness, reduce the risk of audits, free up financial resources for growth, and increase flexibility in managing their business. If you're a small business owner, it's worth investigating whether your business qualifies for the ERC tax credit and exploring other tax credit programs that can help you save money and grow your business. With the right support and resources, small businesses can thrive and succeed even in challenging times.
National Small Business Association. (2021). Economic Report of Small Business. Retrieved from https://www.nsba.net/wp-content/uploads/2021/02/Economic-Report-of-Small-Business-2020.pdf
Small Business Administration. (2021). Tax Information. Retrieved from https://www.sba.gov/business-guide/manage-your-business/pay-taxes
Glassdoor. (2015). Why Employee Morale is Important (& How to Improve It). Retrieved from https://www.glassdoor.com/blog/employee-morale/
Small Business Administration. (2021). Competing in Today's Market. Retrieved from https://www.sba.gov/business-guide/manage-your-business/competing-todays-market
National Federation of Independent Business. (2020). Small Business Problems and Priorities. Retrieved from https://www.nfib.com/content/analysis/economy/small-business-problems-and-priorities/
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