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Is the ERC a refundable tax credit?

Unlike the PPP loan, the ERC program is a refundable tax credit. Find out exactly what that means and how it benefits your business

For US businesses, two of the biggest benefits to come out of the CARES Act were the PPP loan and the ERC program.

But because most people tend to be more familiar with the PPP, many of them aren't as sure what, exactly, the ERC does or how it works.

The ERC program is not a loan

Unlike the PPP, any ERC money you claim does not have to be paid back to the government. Instead of being a loan that you'll either need to repay or have forgiven, any ERC funds you receive are 100% yours to keep forever and use however you best see fit.

But if the ERC isn't a loan, then what is it?

Well, the first clue is in the name. ERC stands for "Employee Retention Credit." And that's exactly what it is: a tax credit. A refundable one, to be exact.

Like with other tax credits, the ERC program allows you to reclaim extra money you paid the government for your payroll taxes during the COVID-19 pandemic.

That's where the refund part comes in.

The government is essentially refunding your overpaid payroll taxes, with the money getting credited to you as a check from the IRS.

So to sum it all up, the ERC is a refundable tax credit for a qualified business's payroll taxes in specific quarters of 2020 and 2021.

Why being a refundable tax credit matters

Okay, so now that you know it's a refundable tax credit, you might be wondering what that means or why it matters.

Basically, it means that any money you receive doesn't have to be repaid back to the government.

And, as we already mentioned, you can use it however you want. So whether that's to reinvest right back into your business or to use it for something else, it's your call. You're the one in control.

Another reason it matters that it's a refund is that you don't have to count it as part of your business's taxable income for the years or quarters you received it.

However, that doesn't mean it won't affect your income tax return at all. While it doesn't change your past income taxes, it will affect it in other ways. Namely, you'll need to reduce your reported wages by the amount of the credit.

Since we aren't tax experts, and we don't provide tax advice, we recommend that you talk to your CPA or a tax professional to get a more clear picture of how an ERC refund will affect your income taxes going forward.

They'll be able to make sure everything gets adjusted and reported properly when doing your taxes for the year you received the credit in.

Your experts in Employee Retention Credits

Now, while it's true we aren't tax experts, we are ERC experts. We know exactly what goes in to making sure you're able to claim the maximum refund you qualify for.

If you'd like to learn more about ERC refunds and how much you could get, give us a call today. Our ERC experts are standing by to help your business recover from the economic impacts of the COVID-19 pandemic.

Still have questions?

We've launched our knowledge base with even more answers to your questions about the ERC program.

Visit Our Knowledge Base
Step 1
Estimate your potential ERC credit
Potential credit amount


*This is an estimate only based on the employee counts entered and does not represent a guarantee of the credit amount you will receive, or that you will qualify for the program.

ERC GO has already helped a staggering:


...businesses file their ERC claims...and counting!

The ERC helps businesses recover from COVID

What is the Employee Retention Credit program?

The Employee Retention Credit is an economic stimulus program for American businesses. With no limits on funding, your business could potentially receive thousands of dollars!