Frequently Asked Questions

Understanding the nuances of Employee Retention Credits can be difficult. We’re here to help, then get you the credit you deserve!

What is the Employee Retention Credit (ERC)?

The Employee Retention Credit (ERC) is a refundable payroll tax credit, up to $26,000 per employee, available through the CARES Act to businesses impacted by COVID-19.

While both PPP and ERC are part of the CARES Act, there are some notable differences: the PPP was structured as a forgivable loan through your local bank via the SBA; the ERC is a payroll tax credit through the IRS – it is not a forgivable loan; it is cash for you to do whatever you choose. The PPP had a specific funding amount and PPP funds ran out; ERC funds don’t run out, you just have to claim your credit prior to the end of the 3 year lookback period. Finally, the PPP isn’t taxable; the ERC is.

Yes! Before the Consolidated Appropriations Act (CAA) was passed in December 2020, businesses could not claim ERC if they had accepted a PPP loan. With the updated CAA, businesses are eligible in 2021 even if they claimed a Paycheck Protection Program loan.

Eligible employers are small businesses in the US that carry on a trade or business during the calendar year 2020 and / or 2021 and have fewer than 500 W-2 employees (important note: you can have more than 500 W-2  + 1099 employees and still qualify, you just can’t have more than 500 W-2 employees). This includes tax-exempt organizations that experienced either of the following:

  • Full or partial suspension to business operations during any calendar quarter in 2020 and / or 2021. These are attributed to governmental orders that limit commerce, travel or other group meetings due to the COVID-19 pandemic.
  • Experienced a significant decline in gross receipts (SDGR) during a calendar quarter for 2020 or 2021. For 2020 quarters, SDGR is defined as a decline of at least 50% compared to the same quarter in 2019. For 2021, this metric has been reduced to a decline of at least 20% for the comparable quarter.

Qualified wages are compensation provided to employees during an eligible period after March 12, 2020, inclusive of health plan expenses.

Yes, 100% of your ERC is taxable in the year it’s received, subject to your business having taxable income. The slightly wonky answer is: ERC is a reduction of wage expense in the relevant year. If, for example, you deducted $15,000 in wages and you received $5,000 in ERC, you would have $10,000 in deductible wages.

The challenge with CPAs is that the ERC credit is taken on your payroll returns and not through your business income tax returns, which is what most CPAs handle. So the vast majority of the time, they are not very well versed in the +150 pages of the ERC tax code, which means you may get less than you should! And on the other side, payroll providers like ADP certainly aren’t tax experts – choosing them to do your ERC is like choosing a dentist to fix your foot!

In 2020, we saw a gap in the market that existed between income tax CPAs and payroll providers, where neither were well equipped to handle ERC work. Because most CPAs handling income tax are not well versed in payroll taxes, and frankly are already overextended with income tax preparation, they simply haven’t had the time and resources to develop the sub-specialty in Employee Retention Credits. If you are just hearing of the ERC now from us, this is likely further evidence of that fact.

On the other hand, payroll providers (ADP, Paycheck, QuickBooks, Gusto, etc.) will submit an ERC claim for you, but will not provide any assistance in determining eligibility and qualified wages. In most cases, they are requiring employers to sign waivers of liability so that the payroll provider cannot be held liable for errors, omissions, or overstatement of ERC claims. Choosing this option may create an immense amount of risk of penalties and other punitive actions from the IRS.

Choosing the experts at ERC Tax Experts is an easy decision!

We have found tens of millions of dollars in credits for our clients, including millions for business owners with multiple locations and business units. Just fill out our 10 question survey below and we’ll begin evaluating your eligibility and within 5 minutes we’ll call you and tell you if you qualify!

Any way you want! It’s a cash refund from the IRS for you to spend however you’d like, including dividends out to owners.

The full or partial suspension test, or FPSO, applies for the periods of time when the operations of a business are shut down due to government order, or are subject to certain restrictions / modifications while they are allowed to keep their doors open (such as reductions in operating hours and capacity limit restrictions). An example of a partial suspension is a restaurant that was forced to move to take-out or delivery only, or was forced to move to a reduced capacity limit with dine-in service due to social distancing requirements. A gym or fitness center that is required to move to appointment-only, reduced capacity, closed day-care facilities, etc. might also qualify under the partial suspension test. A doctor’s office that does more than a nominal amount of elective procedures will almost always have a partial suspension for some period of time. A lesser known partial suspension can occur when a business is affected due to supplier related issues. For example, a business that cannot obtain materials or supplies from vendors that were shut down by COVID-19, can also translate into the first business being treated as partially suspended. Finally, there are complex rules that look at businesses with multiple locations, segments, or divisions and can cause the entire business to be treated as partially suspended, even if only due to one of locations, segments, or divisions.

Our experts have experience with all of these cases and we’ve helped hundreds of clients through the complicated tax code to maximize their ERC – typically 40% more than most CPAs, bookkeepers and payroll providers!

This is not a lending program – tax refunds are issued by the US Treasury. Therefore, all eligible employers will receive the funds they are qualified for so long as they file their claim within the 3 year look-back period. Generally speaking, the ERC program will peak by 2023 and run its course by the third quarter of 2024.

Yes, absolutely. We do a lot of “second look” work where Clients have us review their original ERC submission and if we find more credit than originally claimed, we can re-amend your Form(s) 941-X to get you any additional amounts. Even if you’ve gotten your ERC check already and cashed it, there is still an opportunity to re-amend and re-file your claim to get the max credit you deserve. Getting a “second look” from us is 100% free – it’s undoubtedly the easiest decision you’ll make all day! Just fill out our form to get started.

We are so confident in our specialized approach, that our services are offered with a “pay us when you get paid” guarantee. After you fill out our webform, we’ll call you and discuss how we charge for our services.

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