Cash Flow Issues Prompt Businesses to Overpay Taxes on ERTC 2022

According to research, more than 82% of businesses fail due to cash flow issues inhibiting their ability to meet payroll, cover expenses and maintain reserves. In the past two years, over 2 million business owners have filed for the Employee Retention Tax Credit (ERTC 2022), totaling hundreds of millions in anticipated refunds.

However, as the current filing season is nearing the halfway mark, many employers are facing a scenario in which they will have to overpay taxes as well.

What is the Advanced Employee Retention Tax Credit?

The Advanced Employee Retention Tax Credit was designated by Congress to aid businesses in their economic recovery by providing early access to cash in lieu of waiting until taxes were due. These funds allow companies to cover payroll expenses throughout the year while redirecting cash reserves to other financial obligations.

As a part of the Coronavirus Aid, Relief and Economic Security Act, this fully refundable payroll tax credit aided business owners in retaining millions of employees through the postponement of federal tax liabilities.

Qualifying entities can receive between $28,000 and $33,000 for each year that they meet certifying criteria. Although the IIJA removed the credit for Q4 of 2021, filing for the ERTC 2022 is still possible, with the credit being retroactive in certain situations.

  • Having began as a recovery business founded after February 15th, 2020
  • Retaining no more than 500 full-time employees on payroll
  • Encountered a halt in business operations due to a government order caused by the pandemic
  • Previously faced a serious decline in gross receipts over the past 3 years.

One of our highly certified tax specialists can aid your business in applying for the Employee Retention Tax Credit to recover some of the payroll costs incurred by keeping your employees afloat.

Why Businesses are Facing Cash Flow Issues with ERTC 2022

Major sectors such as hospitality,manufacturing, and the shipping industry have endured a catastrophic slowdown of business operations even as Covid restrictions have been lifted as they struggle to return to profits reaching pre-pandemic levels. This coupled with the fact that the Internal Revenue Service is navigating a serious backlog for return processing, has left many business owners scrambling to account for overpayments in the current season without a resolution on cash flow issues from prior years.

A report from the National Taxpayer Advocate Service shows that nearly 2.8 million business owners are awaiting the processing of business tax returns containing the Employee Retention Credit as of November 2021. This number has risen substantially in the past few months as returns are being submitted for ERTC 2022. 

business tax credit
Courtesy of National Taxpayer Advocate Annual Report
Image Credit: Courtesy of National Taxpayer Advocate Annual Report

How to Solve ERTC 2022 Cash Flow Problems

Any successful business owner will concur that cash flow issues are one of most significant differences between a company that stays afloat or evolves into an unforeseen bankruptcy. While there are several reasons that a cash flow issue may exist, some of the most common are lack of expense tracking, relaxed payment policies with customers or failure to anticipate cash revenue projections over a period of several months.

Our specialists at ERTCFiling.com have encountered a wide variety of roadblocks surrounding the Employee Retention Tax Credit. Many of our clients have been able to overcome some of the cash flow issues they have faced by incorporating some of the following strategies.

  • Researching potential for amended returns – As business owners file taxes each quarter, they may not realize that when significant changes were made to the ERTC, it affected the number of employees and/or amount of wages that would qualify for the payroll tax credit. An amendment may help your company receive additional funds that you may not have anticipated being approved for.

How to Avoid an Overpayment on Your Business Tax Return

The Safe Harbor program has been enacted as a result of thousands of businesses erroneously misfiling their returns based on information that abruptly changed from one year to the next. A lack of understanding the guidance provided or the complexities of filing a proper tax return has left some companies indebted to the government as a result of an overpayment.

These business owners are required to file timely returns to avoid IRS penalties, as well as fees on potentially late filings. In order to avoid an overpayment on your business tax return you will need to contend with the following issues in order to remain tax compliant:

  • Repayment of advanced ERTC amounts for disqualifying business quarters
  • Increases in payroll taxes such as social security and unemployment to commensurate with wages
  • Reporting of additional liability resulting from retroactive payroll tax credit termination
  • Submission of proper relief notices to accompany payments dependent on tax circumstance

By avoiding an overpayment your tax account will remain in good standing while alleviating the worries that can be added as a result of rearranging or auditing your businesses payroll and accounting.

Conclusion

ERTCFiling.com has assisted many small business owners who have already encountered a series of cash flow problems, to successfully file for the Employee Retention Tax Credit over the past two years. Our staff has recovered more than $100 million dollars for clients who met the standards for the payroll tax credit. If you are facing a lack of revenue and seeking a solution to your business needs, then speak with one of our highly trained tax specialists today.