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Do you have to pay back an ERC refund?

Do You Have to Pay Back an ERC Refund?

Lots of folks are wondering if they gotta pay back the money they got from the Employee Retention Credit (ERC). This article will explain everything real simple so you can understand what’s going on.

The ERC is a tax credit that came out during COVID to help businesses keep employees on payroll. If your business qualified, you could get a refund of up to $5,000 per employee for 2020 and 2021.

A tax credit means you get money back from the government. It’s not a loan. So if you qualified and got an ERC refund, you don’t gotta pay it back.

How the ERC Works

Here’s a quick rundown of how the ERC works:

  • It’s a refundable tax credit, meaning you get money back from the IRS.
  • You claim it by filing IRS Form 941 and reporting qualified wages paid.
  • The credit is worth up to 50% of wages paid, up to $5,000 per employee for 2020-2021.
  • You can get the refund even if you didn’t owe any payroll taxes.

So it’s basically free money from the government to help retain employees. As long as you qualified, you can keep it!

Common ERC Refund Misconceptions

There’s some wrong ideas floating around about having to pay back the ERC. Let’s bust those myths:

Myth: The ERC is a loan

Nope! The ERC is a tax credit, not a loan. You don’t have to pay it back.

Christine Twomey
Christine Twomey
2024-03-21
Just had my Divorce case settled 2 months ago after having a horrible experience with another firm. I couldn’t be happier with Claire Banks and Elizabeth Garvey with their outstanding professionalism in doing so with Spodek Law Group. Any time I needed questions answered they were always prompt in doing so with all my uncertainties after 30 yrs of marriage.I feel from the bottom of my heart you will NOT be disappointed with either one. Thanks a million.
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Brendan huisman
2024-03-18
Alex Zhik contacted me almost immediately when I reached out to Spodek for a consultation and was able to effectively communicate the path forward/consequences of my legal issue. I immediately agreed to hire Alex for his services and did not regret my choice. He was able to cover my case in court (with 1 day notice) and not only was he able to push my case down, he carefully negotiated a dismissal of the charge altogether. I highly recommend Spodek, and more specifically, Alex Zhik for all of your legal issues. Thanks guys!
Guerline Menard
Guerline Menard
2024-03-18
Thanks again Spodek law firm, particularly Esq Claire Banks who stood right there with us up to the finish line. Attached photos taken right outside of the court building and the smile on our faces represented victory, a breath of fresh air and satisfaction. We are very happy that this is over and we can move on with our lives. Thanks Spodek law 🙏🏼🙏🏼🙏🏼🙏🏼🙌🏼❤️
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Keisha Parris
2024-03-15
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
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Taïko Beauty
2024-03-15
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence. Thank you team!
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2024-03-12
Hey, how you guys doing? Good afternoon my name is Anthony Williams I just want to give a great shout out to the team of. Spodek law group. It is such a honor to use them and to use their assistance through this whole case from start to finish. They did everything that they said they was gonna do and if it ever comes down to it, if I ever have to use them again, hands-down they will be the first law office at the top of my list, thank you guys so much. It was a pleasure having you guys by my side so if you guys ever need them, do not hesitate to pick up the phone and give them a call.
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Loveth Okpedo
2024-03-12
Very professional, very transparent, over all a great experience
Bee L
Bee L
2024-02-28
Amazing experience with Spodek! Very professional lawyers who take your case seriously. They treated me with respect, were always available, and answered any and all questions. They were able to help me very successfully and removed a huge stress. Highly recommend.
divesh patel
divesh patel
2024-02-24
I can't recommend Alex Zhik and Spodek Law Firm highly enough for their exceptional legal representation and personal mentorship. From the moment I engaged their services in October 2022, Alex took the time to understand my case thoroughly and provided guidance every step of the way. Alex's dedication to my case went above and beyond my expectations. His expertise, attention to detail, and commitment to achieving the best possible outcome were evident throughout the entire process. He took the time to mentor me, ensuring I understood the legal complexities involved to make informed decisions. Alex is the kind of guy you would want to have a beer with and has made a meaningful impact on me. I also want to acknowledge Todd Spodek, the leader of the firm, who played a crucial role in my case. His leadership and support bolstered the efforts of Alex, and his involvement highlighted the firm's commitment to excellence. Thanks to Alex Zhik and Todd Spodek, I achieved the outcome I desired, and I am incredibly grateful for their professionalism, expertise, and genuine care. If you're in need of legal representation, look no further than this outstanding team.

Myth: I’ll have to pay it back later in taxes

Wrong again! The ERC does not create a future tax bill. It just reduces how much tax you owed for 2020-2021.

Myth: The ERC will be clawed back

The IRS isn’t going to “claw back” or take back a proper ERC refund. As long as you qualified, it’s yours to keep.

Myth: The ERC is too good to be true

The ERC refunds are 100% real! The government created this tax credit to help employers retain staff during COVID.

When You Might Owe an ERC Refund Back

Okay, so are there any cases where you’d have to repay an ERC refund? Yes, but only if:

  • You got the refund by mistake or fraud.
  • You ended up not actually qualifying for the full amount.

For example, if you got $100,000 in ERC but then realized you only qualified for $75,000, you’d have to pay back that extra $25,000. Or if you lied on your taxes to get the credit, you could get in big trouble.

But as long as you qualified honestly and claimed the right amount, you can keep your ERC refund. No takebacks!

The ERC Has Expired

One important thing to know is the ERC program ended on September 30, 2021 for most businesses. So you can’t claim any new credits for 2022 and beyond.

But that doesn’t affect refunds businesses already got for 2020 and 2021 wages. That money is still yours to keep.

You Can Still Amend to Claim More ERC

If you qualified for more ERC than you originally claimed, you can still file an amended return to get additional refund money.

For example, if you only claimed $20,000 in ERC but actually qualified for $30,000, you can amend your taxes to claim that extra $10,000.

Amended returns for the ERC must be filed by December 31, 2024. So you have some time left to get all the ERC refunds you deserve.

The ERC and PPP Loans

Another common question is whether getting a Paycheck Protection Program (PPP) loan affects the ERC. The short answer is:

  • You can’t claim ERC on wages used for PPP loan forgiveness.
  • But you can claim ERC on other eligible wages.

So having a PPP loan doesn’t make you ineligible for the ERC altogether. It just reduces how much ERC you can claim if you use some wages for both programs.

Conclusion

The bottom line is the ERC is free money to help retain employees, not a loan. If you qualified and got a proper refund, you get to keep it!

Just make sure you claimed the right amount. And if you think you qualify for more, file an amended return before the deadline.

We hope this article cleared up confusion about paying back ERC refunds. It’s your money fair and square!

References

IRS, Employee Retention Credit

IRS, FAQ about the ERC

StenTam, ERC101: Does the ERC Need to Be Paid Back?

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