Employee Retention Tax Credit

EMPLOYEE RETENTION TAX CREDIT

EMPLOYEE RETENTION TAX CREDIT: DO YOU QUALIFY FOR THE CARES ACT CREDIT?

MEET THE AUTHORS:

Ashley Durand, CPA

The Employee Retention Credit (ERC) is a government incentive program rewarding employers who retained company staff on payroll during the peak of the COVID 19 outbreak. The credit is claimed under Act Sec. 2301 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan Act of 2021. The credit is lucrative and available for those who qualify.

DOES YOUR FIRM QUALIFY FOR THE EMPLOYEE RETENTION CREDIT? Vikki Johnson, CPA

Glenn Cody

“We’ve been succcessful at getting the ERC for clients who incorrectly thought they couldn’t qualify because they had previously received a PPP loan.”

— Glenn Cody, R & D Consultant, CTA

Both small- and mid-sized businesses can qualify for the ERC which covers the period of March 13, 2020, through September 30, 2021. Employers qualify by quarter and receive a total of $5,000 for each employee retained for 2020 and $7,000 per employee for up to three quarters in 2021. In fact, employers who qualify for the entire 18-month program term may receive as much as $26,000 per employee. The credit is not a loan and it does not have to be repaid.

“Neither I nor my accountant had any knowledge of the employee retention tax credit and we would have completely missed out on those large incentives without CTA’s help.” — David Sansotta, PE, SE, Structural Edge Engineering As with many laws, shifting rules and regulations have significantly expanded the ERC from when it was originally signed into law in March 2020. For example, “large employers” are only allowed to take credits for employees who are actually furloughed during the program period. The program has changed the classification of a Large Employer from 100+ employees in 2020 to 500+ employees in 2021; greatly increasing the number of employees that a company may include in their credit.

Any business in any industry can qualify for the credit; however, businesses operating in the hospitality and restaurant industries as well as retail, construction, and healthcare are highly likely to qualify for the ERC. The ERC is claimed on payroll tax returns and is relevant if an employee was furloughed or laid off –

EMPLOYEE RETENTION TAX CREDIT: DO YOU QUALIFY FOR THE CARES ACT CREDIT?

but not terminated – during the qualified periods.

Additionally, the employee must have continued to receive a paycheck and health benefits (if applicable) through the end of the quarter in question. Businesses may not claim credits for any employee who was terminated at any point in the applicable quarter or did not return to their position after a layoff or furlough.

According to Corporate Tax Advisors (CTA), a firm specializing in providing tax solutions nationwide to certified public accountants and businesses alike, the ERC is often overlooked or dismissed which can mistakenly disqualify a business from receiving the credit. “We specialize in determining if a business qualifies. Often CPAs aren’t familiar with the nuances of new credit programs. CTA works with your CPA to determine if you qualify and prepares the paperwork your tax professional will use to file or amend your payroll tax return so you can claim the credits you deserve,” said Ashley Durand, CPA, Tax Manager at CTA. According to Forbes, small- and mid-sized business owners are potentially leaving billions of dollars unclaimed because they don’t understand how to qualify and claim the ERC. “Government incentive programs are known to be complicated. The ERC is an appealing incentive, but I didn’t know the process, and my CPA was not as familiar with the ERC as he is with other programs,” said Chad Clinehens, President-CEO of Zweig Group. “CTA worked with our tax professional to determine if we qualified — and we did!”

There are two ways to qualify for the Employee Retention Credit: 1. The business experiences a significant decline in gross receipts; 50% in 2020; 20% in 2021.

2.The business experiences a partial or full suspension of operations due to a government-mandated shutdown. Issues causing shutdowns can include labor shortages; quarantines due to illness; transition to telework; supply chain disruptions; and reduced work hours or capacity of operations.

Forbes estimates that billions of dollars targeted for the ERC may go unclaimed Why CTA

CTA has developed a proprietary questionnaire that quickly assesses eligibility, including determining the qualifying event of a disruption of 10% or more in a company’s operations. If a business has already filed 2020 or 2021 taxes, it’s possible to amend the payroll tax returns for the qualifying quarter to receive the ERC. And, if you claimed and received a PPP loan, you can still qualify for the ERC. CTA is here to help.

There are a variety of required documents to submit when filing or amending payroll tax returns to claim the ERC. Contact CTA for assistance in filing these documents timely and correctly so that you receive your share of the Employee Retention Credit: Dawson Fercho (dawsonf@corporatetaxadvisors.com) or Paula Weis (PaulaW@corporatetaxadvisors.com).

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