Receiving an ERC refund is exciting. However, since it's potentially a lot of money for most businesses who qualify, it's important that you plan ahead for how you plan to use your money when you get it.
ERC money can be used for anything!
One of the most important reasons for you to make a plan for how you'll spend your ERC refund is the fact that there are absolutely no rules or limits about what it can be used for.
And with unlimited possibilities, there's a lot of potential to spend it unwisely.
That's why we recommend that you make a plan. Whether you do this on your own or with your CPA or financial advisor, it doesn't matter. The only thing that matters is that you have the plan in the first place.
How many businesses are spending their ERC money
In our opinion, one of the smartest ways you can spend the money is by reinvesting it back into your business.
Since the ERC program was originally created to help businesses recover from shutdowns and financial losses during the pandemic, it simply makes sense for you to use the money that way.
However, "reinvesting in your business" is kind of a broad, vague term. To make things easier for you and to get the ideas flowing, here are some of the more common ways we've seen businesses accomplish it:
- Increasing current employee wages to improve retention
- Rehiring employees who had to be downsized during the pandemic
- Attracting new employees as you build up your workforce
- Increasing your marketing budget to attract new clients or customers
- Expanding or upgrading your services or product offerings
- Investing in training and continuing education
However, don't feel like you have to choose one of these options. Reinvesting in yourself, for example, can also be beneficial to your business if it helps you become a better leader.
Since there truly are no restrictions on how ERC money can be spent, you have the freedom to really look at your business and decide which things will have the biggest effect.
Why ERC refunds don't have any limitations
If you're familiar with the PPP loan, then you probably know it has really strict rules about how it can be spent.
And since the ERC program was created at the same time as the PPP, you might be wondering why it has so much more freedom.
Well, the answer to this question is that the Paycheck Protection Program is a loan while the ERC program is not.
Instead, it's a refundable tax credit.
Basically that means because of the changes to the legal code made by the passage of the CARES Act and subsequent legislation, you potentially overpaid your payroll taxes for certain qualified employees in 2020 and 2021.
It should have been your money to begin with, and the government can't tell you how you can spend your money. Only you can decide that, which is why there's no limitations on what you do with your ERC funds.
Put another way, the ERC program provides cash back for something you've already done, which is to retain and pay your employees during the COVID-19 pandemic, despite facing shutdowns and financial losses.
Get the injection of cash your business needs
Here's the thing: most businesses right now could use an injection of cash.
Many are struggling after two years of closures and declining receipts, and claiming ERC funds is one tool you can use to turn things around so they're heading in the right direction.
So what are you waiting for? Give our team of ERC experts a call today so we can help you claim some extra money for your business.