Employee retention Tax credit Consultants

The Coronavirus Aid, Relief, and Economic Security Act (also known as the CARES Act) was signed into law on March 27, 2020. It included two programs to assist businesses with keeping workers employed: the Payroll Protection Program (PPP) administered by the Small Business Adminstration and Employee Retention Tax Credit (ERTC) administered by the Internal Revenue Service. PPP funds are distributed based on 2.5 months of payroll and a minimum of 80% of the funds must be used on payroll to be eligible for forgiveness. Additionally, PPP funds are not taxable as revenue and you may still take deductions for the payroll covered by PPP. ERTC tax credits, however, are credits (or refunds) for a percentage of payroll in each quarter that you qualify. There are specific rules for determining eligibility by quarter, and limiting the dollars that can be claimed for each employee.

While the CARES Act originally prohibited having both an ERC and a PPP loan, the stimulus legislation recently passed (Consolidated Appropriations Act of 2021) eliminated this prohibition retroactive to March 13, 2020. 98% of our clients qualify for ERC check, even if they received PPP or PPP-2 loan. Your business can now have both a PPP loan and ERC refund, however, special calculations around payroll wages and attribution is required. The ERC process can be complex with over 1,000 pages of guidance therefore we suggest using our professional services to ensure you qualify for the maximum benefit for your company.

Even though you may feel like revenue is back to normal, there are some items you want to consider before passing on this ERTC assessment. First, even if revenues have returned to “normal” in 2021, you may have qualified in 2020 and you can retroactively claim those credits. That eligibility criteria in 2020 was based on revenue declines from 2019, or if your business was partially or fully closed due to governmental mandate. Second, while your revenue may have returned to “normal” in Q1 2021, remember that we are comparing your Q1 2021 to Q1 2019. If 2019 was a year of growth for your business, then your revenue levels 2 years ago may have been much less than Q1 2020. And lastly, if your revenues were down in Q4 2020 by just 20% compared to Q4 2019, then you may also be eligible for Q1 2021. There is a safe harbor provision that few advisors are talking about, and it means that many businesses are qualifying for $7,000 per employee in Q1 2021. I know, it seems too good to be true, but the government wants to incentivize and reward you for keeping US residents employed and money flowing through our economy as we rebuild bigger and stronger than before.

There are many ways that businesses fully or partially suspended operations during each calendar quarter. We help you document this as part of the application. A partial suspension of operations can take many forms. Here are some common examples we see in businesses like yours: • unable to attend trade shows in-person (“travel or group meetings”) • had staff go from in-office to work-from-home and had an impact • retail or restaurant that reduced the number of customers allowed inside • closed a department or business unit while other units continued to operate.

Yes! You have to be a business owner and calculations are based on the number of W-2 Employees you had. 1099 Independent Contractors do not figure in ERTC calculations.

Your banker, CPA, or Financial Advisor was probably very helpful when it came to getting your PPP funds because they were effectively signing you to an SBA-guaranteed loan. The SBA paid the bank administrative fees based on the PPP loans they made, and so they were incentivized to educate you about the program and get all your paperwork in order. Compared to the ERTC, the PPP program was also a rather simple calculation. 2 ½ times your average monthly payroll including health insurance and state unemployment taxes. From the conversations we’ve had with bankers, CPA’s and Financial Advisors have no interest in involving themselves in your employment tax compliance. For them it is a liability and beyond their scope of services.