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Employee Retention Credit DOs and DON’Ts

January 12, 2023

When it comes to the Employee Retention Credit (ERC), you’ll want to do your due diligence to make sure you are not being improperly advised of your eligibility to claim the credit by a third-party ERC mill. Here are some Dos and Don’ts.

What is the Employee Retention Credit?

The Employee Retention Tax Credit (ERC) is a refundable tax credit applied against certain employment taxes (Social Security, Medicare, etc.) of qualified wages an employer pays to its employees.

There are 2 ways to qualify for the credit –

  • The 1st criteria – You experienced a full or partial suspension of operations during 2020 or 2021 because of governmental orders limiting commerce and impacting your business.
  • The 2nd criteria – You had at least a 50% decline in gross receipts in any calendar quarter in 2020 compared to the same quarter in 2019 (20% decline in gross receipts in any calendar quarter in 2021 (or Q4 2020) compared to the same quarter in 2019).

What is an ERC mill?

Check out our blog, IRS Provides New Process to Report ERC Mills. The term ERC mill is used to describe service providers who are self-proclaimed “ERC experts” or “consultants” who push employers to claim the ERC even if they may not qualify.


  • DO speak with your tax advisor about ERC- If you’re eligible, it’s a great benefit; but DO your due diligence!
  • DO obtain/create a workbook documenting your entity’s eligibility and calculation of the credit by quarter by employee. Essentially, if the IRS decides to audit you, it will be several years before your records get looked at in some cases. You may forget some positions you took, so it’s helpful to have written documentation.
  • DO optimize ERC with PPP!
  • DO include health insurance costs paid for the employee by the company as eligible wages!
  • DO aggregate all related parties when determining eligibility.


  • DON’T be overly aggressive with shut down orders!
    • The shutdown must be government ordered, not voluntary.
    • If the work could be replaced with teleworking, you do not qualify.
    • The shutdown must have had more than a nominal effect on your business. The IRS considers revenues (or hours) in excess of 10% as the threshold to determine whether or not a shutdown order had more than a nominal effect.
  • DON’T claim ERC on owners’ wages or related family members.
  • DON’T double dip on PPP or other non-eligible wages.

Questions on the ERC? We can help. Reach out to us today.

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