ERC tips for small businesses: Beware of bad operators and red flags - Dallas Business Journal

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The ERC is extremely lucrative, but the complex nature of the credit means businesses need to be diligent about looking for red flags and bad operators that could prove costly.

The Employee Retention Credit is one of the few lucrative options remaining for small businesses looking for Covid-19 relief.

As we've noted before, the rollout of the ERC was complex and accompanied by major changes, which has created avenues for some operators to prey on confusion among businesses. To qualify, businesses need to see a drop in revenue during 2020 and or the first three quarters 2021 compared to 2019, or — and it's a big or — they had to be operating under significant government restrictions, which includes many restaurants, daycares and other businesses. Companies that qualify in all available quarters could receive up to $26,000 per full-time employee over the entire credit — although that's not common.

Business owners should also be wary of groups that say the ERC will be quick, since it often takes eight months to a year or longer to receive the refund, McCabe said. It's not enough that business owners spent money on personal protective equipment or had to buy plastic partitions, she stressed. They had to have seen a material disruption in their business and be closed by a local or state government health order.

A professional accounting firm will also talk to a business owner about the potential cash flow implications of the credit and how to best maneuver through those tax implications, while a fly-by-night firm might not, she said.

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