Employee Retention Credit Eligibility Checklist: Help with avoiding or resolving an incorrect claim (IRS)

Summary

An IRS Employee Retention Credit Eligibility Checklist, headed Help with avoiding or resolving an incorrect claim. It describes the ERC as a pandemic-era tax credit for employers that kept paying employees during the COVID-19 pandemic when they were shut down due to a government order, had the required decline in gross receipts during certain periods in 2020 and 2021, or qualified as a recovery startup business. It states that the IRS continues to warn employers about unscrupulous ERC promoters who oversimplify and misrepresent eligibility rules. Part A is a question-and-answer tool whose first question asks whether the filer operated a trade, business or tax-exempt organization and had employees and paid wages between March 13, 2020, and Dec. 31, 2021.

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Issuer: Congressional materials
Document type: Internal Revenue Service Printable Version Pdf Www Irs Gov 39Aa37F9F6
Case: Internal Revenue Service Printable Version Pdf Www Irs Gov 39Aa37F9F6

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Full text

IRS.gov/ERC

Employee Retention Credit Eligibility Checklist:
Help with avoiding or resolving an incorrect claim
You can use this question-and-answer tool to see if you might be eligible Employee Retention Credit
for the Employee Retention Credit. Resolving an incorrect claim may The ERC is a pandemic-era tax credit
help you avoid having to repay an incorrect credit, possibly with penalties for employers that kept paying
and interest. employees during the COVID-19
pandemic either:
The IRS continues to warn employers about unscrupulous ERC promoters • when they were shut down
who oversimplify and misrepresent eligibility rules and lure ineligible due to a government order, or
taxpayers to claim the credit. • when they had the required
decline in gross receipts
The IRS is committed to helping taxpayers who are eligible, while during certain eligibility
preventing incorrect ERC claims. periods in 2020 and 2021, or
• qualified as a recovery startup
Part A: Check your eligibility business for the third or fourth
quarters of 2021.
Answer these questions in numerical order to see if you may be eligible
for the ERC.
Eligibility questions Next steps
1. Did you 1) operate a trade, business or tax-exempt • If yes, go to #2.
organization and 2) have employees and pay wages • If no, you aren’t eligible to claim the ERC. If you
to them between March 13, 2020, and Dec. 31, 2021? incorrectly claimed ERC, see Part C.

For more info, see IRS.gov/ercqualified. Note –
Household employers are not eligible for ERC.
2. Did your trade or business experience the required • If yes, you may be eligible for the ERC. You will
decline in gross receipts during the eligibility periods in need to confirm that your decline in receipts
2020 or the first three calendar quarters (Jan. through meets requirements. See IRS.gov/ercdecline. If
Sept.) of 2021? you meet the requirements, skip to Part B.
• If no, go to #3.
For more info and examples, see IRS.gov/ercdecline
3. Are you claiming the ERC because of supply chain • If yes, be extremely cautious. A supply chain
issues? disruption by itself doesn’t qualify you for the
ERC. Carefully review IRS.gov/ercsupply and
For more info, see IRS.gov/ercsupply and the IRS examples in the legal memo on supply chain
legal memo on supply chain disruptions (AM-2023- disruptions (AM-2023-005). Be sure your
005), which includes examples. supplier’s government order meets the criteria
in #4; then go to Part B. If you incorrectly
claimed ERC, go to Part C.
• If no, see #4.

Publication 5887 (Rev. 12-2024) Catalog Number 94470G Department of the Treasury Internal Revenue Service www.irs.gov
IRS.gov/ERC

4. Was the operation of your business or organization • If yes, you may be eligible for the ERC. For
fully or partially suspended by a government order more information and examples of government
due to the COVID-19 pandemic during 2020 or the orders and full or partial suspension see
first three calendar quarters (Jan. through Sept.) of IRS.gov/ercqualifying. Make sure you have
2021? documentation of the government order related
• The order must be a government order, not to COVID-19, how and when it suspended your
guidance, a recommendation or a statement. operations, and the qualified wages you paid.
• The government order must be due to the The IRS will consider your operations to be
COVID-19 pandemic and must have fully or partially suspended if you can show that more
partially suspended your operations. than a nominal portion of your business was
• You can only claim ERC for periods the order was suspended by a government order. You can
in effect and your operations were suspended. only use wages paid during the period the
government order was in effect when
For more info, see IRS.gov/ercqualifying calculating your credit. Go to Part B.
• If no, go to #5.
5. Were you a recovery startup business (RSB)? This • If yes, you may be eligible for the ERC. See
means you: IRS.gov/ercrecovery. RSBs are limited to a
• Began carrying on a trade or business after Feb. maximum of $50,000 in ERC per quarter and
15, 2020, can claim ERC only for the third and fourth
• Had $1 million or less in average annual gross quarters of 2021. If you meet all the
receipts for the prior 3 tax years, and requirements, skip to Part B.
• Didn’t qualify for ERC under the gross receipts test • If no, you are not eligible to claim the ERC. If
(#2) or suspension test (#4)? you incorrectly claimed ERC, go to Part C.

For more info, see IRS.gov/ercrecovery

Part B: Claim the ERC if you’re eligible
If the previous questions directed you to Part B, you may qualify for the ERC based on the information you provided.
Be sure you have thorough records that show wages paid, gross receipts, government orders and other required
documents. If you need help, you should work with a trusted tax professional.

Check IRS.gov/erc for updates and other information such as frequently asked questions, examples, guidance,
warning signs of scams and more.

Part C: Resolve an incorrect ERC claim
If you incorrectly claimed the Employee Retention Credit, you can use the ERC claim withdrawal process outlined
at IRS.gov/withdrawmyerc if you haven’t received the credit or haven’t cashed or deposited an ERC check.

Requesting a withdrawal means you’re asking the IRS not to process your entire adjusted return that included your
ERC claim. If the IRS accepts your request, the claim will be treated as if it was never filed.

If you’re not able to use the withdrawal process, you can still file another adjusted return if you need to reduce the
amount of your ERC claim or make other changes to your adjusted return.

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