Frequently Asked Questions
How long does the ERC application process take?
How Much of My Time or Involvement will this Process Take?
Does the Employee Retention Credit have to be paid back?
It is NOT a loan and does not have to be paid back.
What is the Employee Retention Credit?
The Employee Retention Credit (“ERC”) provides a wide variety of employers with refundable payroll tax credits for qualified wages paid to employees in 2020 and 2021. The ERC is a refundable tax credit that businesses can claim on qualified wages, including certain health insurance costs, paid to employees.
Businesses can still apply for the ERC by filing an amended Form 941X (Quarterly Federal Payroll Tax Return) for the quarters during which the company was eligible to apply for this credit.
What wages qualify when calculating the retention credit?
All wages that are subject to FICA taxes, generally W-2 wages, as well as qualified health expenses are used when calculating the employee retention credit. These payments must have been made after March 12, 2020 and can continue through Sept. 30, 2021 (Recovery Startup Businesses are eligible thru Dec. 31, 2021).
Extra caution must be taken not to use wages for ERC that are forgiven or expected to be forgiven under PPP.
Are Owner/Spouse Wages Included in Qualified Wages?
The IRS gave specific guidance that related individuals to a majority owner were not included in qualified wages. However, the owner and spouse wages were unclear. Related individuals are:
- Child or a descendant of a child
- Brother, sister, stepbrother or stepsister
- Father or mother, or an ancestor of either
- Stepfather or stepmother
- Niece or nephew
- Aunt or uncle
- Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
Notice 2021-49 clarified that attribution rules must be applied to assess whether the owner or spouse’s wages can be included for the ERC. Essentially, the assessment is dependent on these related individuals previously mentioned and, if any of these individuals would be considered a majority owner. If they are considered a majority owner, then their wages are not qualified wages for ERC.
If I received a PPP loan, am I ineligible?
If I did not have a reduction in revenue, am I ineligible?
There is no necessity for a 25% reduction in revenue if you can demonstrate a partial interruption in business operations. There are many ways businesses fully or partially suspended operations during each calendar quarter. This may include, capacity restrictions, transitioning to Telehealth for medical facilities, and other interruptions that are non-nominal in nature.
If your business had a decline of gross receipts by a minimum of 20% in any quarter versus the same quarter in 2019 or they had to change operations due to governmental orders, then your business most likely qualifies. A change in operations could mean extra cleaning or sanitizing, limiting capacity or reducing hours, installing/utilizing protective equipment, temperature checks, or operational impact related to key suppliers or staff. For example, an Adult Day Care Facility will be eligible if they needed to do temperature checks, or keep social distancing rules even if they continued to operate.
Rest assured that our expert team will advise you on how to obtain the maximum credit based upon your eligibility.
Why shouldn’t my Accountant, Payroll Provider, or Banker be on top of ERC Filing?
The IRS has over 170 pages of information and requirements for navigating the Employee Retention Credit. In a nutshell, it’s complicated!
We have worked out for you to be able to maximize your claim using minimal effort on your end. Our tax specialists and consultants are well versed in all areas of ERC and will guide you successfully.
When it came to PPP funds, your CPA, Financial Advisor, or Banker were likely helpful since they were getting you an SBA funded loan. They were incentivized by the SBA for helping their clients obtain the PPP funds.
Your CPA is well versed in all areas of annual and quarterly tax filing and is generally not familiar with the intricacies of eligibility for obtaining the maximum ERC refunds.
Regarding your payroll provider, computing your ERC credits require visibility into your P&L and PPP forgiveness applications. This is beyond the scope of service of payroll service providers.