Maximizing Employee Retention Credits: A Comprehensive Guide for Small Businesses in Michigan
August 21, 2023
Courtesy of SBAM Approved Partner, Occams Advisory
In today’s challenging economic landscape, small businesses need every advantage they can get. The Employee Retention Credit (ERC) offers a lifeline, yet many business leaders remain unaware or uncertain about its potential. With 95% of decision-makers believing that the ERC helps businesses weather tough times, it’s essential to understand and harness this credit effectively.
The ERC: A Glimmer of Hope Amidst Challenges
The early 2020s have been tough. 85% of business leaders say it’s been the worst time for small businesses since the Great Depression, with nearly 9 in 10 feeling overwhelmed by rising operating costs, making it challenging to pay competitive wages. With inflation, labor shortages, and the pandemic’s economic aftermath, 9 in 10 business leaders believe it’s nearly impossible for small businesses to thrive today. However, the ERC emerges as a beacon of hope.
Understanding Employee Retention Credits
Introduced during these tumultuous times, Employee Retention Credits were designed to help businesses retain their workforce, promoting economic stability. Unfortunately, 31% of decision-makers at smaller firms admit they have little familiarity with the ERC, compared to 14% at larger organizations. This lack of knowledge is concerning, especially when over 1 in 3 believe their business isn’t even qualified to claim ERC benefits.
The Reality of ERC & Its Benefits
For Tax Year 2020, businesses could claim 50% of the $10K of qualified wages paid per employee, capping at $5,000 per employee for the year. In 2021, this was increased to 70% of the $10K, with a maximum of $7,000 per employee per quarter, amounting to $21,000 for the year.
It’s vital to understand that the current deadline for filing the ERC is approaching. On April 15, 2024, employers will no longer be able to claim quarters in 2020. On April 15, 2025, employers will no longer be able to claim quarters in 2021 – the program will be over. With talk of these deadlines being shortened, it is key that employers act quickly before any changes are made to the program.
A surprising number of decision-makers erroneously believe that having applied for a PPP loan in the past makes their business ineligible for the ERC. This is not true! The ERC and PPP can coexist, though the same wages cannot be claimed for both.
Navigating the ERC Landscape
More than 7 in 10 decision-makers found the ERC application process as challenging as applying for a PPP loan. Describing the ERC process, 51% found it stressful, 46% said it was exhausting, and 35% called it cumbersome.
At Occams Advisory, our ERC experts can alleviate this burden. We understand every business is unique and tailor our approach to fit specific needs. From calculating the credit amount to devising a strategic plan for utilization, we’re here to guide you.
A Call to Action
78% of decision-makers believe they’ve missed the ERC claim deadline or think they’re ineligible. Don’t be part of this statistic. Especially when 84% state their business is suffering due to a lack of knowledge on financial planning and related tasks.
The ERC offers a substantial opportunity to bolster your business’s finances. Don’t wait till the last minute. Reach out to experts, understand your eligibility, and claim what’s rightfully yours.
To learn more about the ERC program available to SBAM members through Occams Advisory, please click here to visit our website.