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FAQ's

ERTC Frequently Asked Questions

Read our some of our frequently asked questions below

The IRS is actively focusing on auditing ERC claims.

If you’ve previously applied for an Employee Retention Tax Credit (ERC) under the CARES Act, consider an audit risk assessment. Set up a Consultation to get a second oppinion  

To qualify as an Eligible Employer for the Employee Retention Credit, an employer must- Be engaged in a trade or business during the 2020 calendar year, including tax-exempt organizations, and meet one of the following criteria:

  1. Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority. But limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the pandemic.
  2. Experience a significant decline in gross receipts during the calendar quarter.

It’s important to note that governmental employers are not considered Eligible Employers for the Employee Retention Credit, but tribal governments, and tribal entities, may qualify. Self-employed individuals are also not eligible for the credit for their own self-employment earnings, but they may be able to claim the credit for wages paid to their employees. * ERC applications are not being accepted after 31st January 2024.

 

Yes, it’s possible. If an employer received a PPP loan, but repaid it by May 18, 2020, they could be eligible. It would be considered as if they never received the PPP loan, for the purposses of the Employee Retention Credit. This makes the employer eligible for the credit if he/she met the requirements of being an Eligible Employer.

To qualify as an Eligible Employer for the Employee Retention Credit, an employer must- Be engaged in a trade or business during the 2020 calendar year, including tax-exempt organizations, and meet one of the following criteria:

  1. Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority. But limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the pandemic..
  2. Experience a significant decline in gross receipts during the calendar quarter.

It’s important to note that governmental employers are not considered Eligible Employers for the Employee Retention Credit, but tribal governments, and tribal entities, may qualify. Self-employed individuals are also not eligible for the credit for their own self-employment earnings, but they may be able to claim the credit for wages paid to their employees.

A “significant decline in gross receipts” occurs when an employer’s gross receipts in a calendar quarter of 2020 are less than 50% of its gross receipts, for the same quarter in 2019. The significant decline continues until the first calendar quarter after the quarter in which the employer’s 2020 gross receipts are greater than 80% of its gross receipts for the same quarter in 2019. Or the first quarter of 2021, whichever comes first.

 

Yes, but not for the same wages. If an Eligible Employer claims the Employee Retention Credit for any qualified wages, they cannot use those same wages to determine the paid family and medical leave credit under section 45S of the Internal Revenue Code. However, the employer may still be able to claim the section 45S credit for any additional wages paid. (that meet the requirements under that section.)

To determine if your company qualifies for the Employee Retention Credit, there are two main criterias to consider. The first is if your business experienced a disruption in operations that began after February 15, 2020 and continued due to the pandemic. This includes businesses that were fully or partially suspended by government orders or were unable to operate at normal capacity due to the pandemic.

The second criteria is a revenue decline. To qualify, your business must have had 500 or fewer employees in 2019.  And your company’s quarterly gross receipts in 2020 and 2021 must be at least 20% lower than the corresponding quarter in 2019. This is to show that your company was financially impacted by the pandemic.

It’s important to note that while a revenue decline is one way to qualify, it’s not the only way. Businesses that experienced a disruption in operations (even if they didn’t have a revenue decline) can still be eligible for the credit. Additionally, to be eligible, your company must be a private sector or tax-exempt organization that was partially or fully shut down due to the pandemic.

The Internal Revenue Service (IRS) estimates that a significant percentage of Small and Medium Businesses (SMBs) are eligible for the Employee Retention Credit (ERC), ranging from 70% to 80%. If your business faced disruptions in its operations due to government orders related to commerce, travel, or group meetings, then it could qualify for the ERC. These disruptions could include supply chain issues, increased prices, reduced hours, fewer goods or services offered, travel restrictions, and missed conventions. To learn more about your eligibility and the application process for the ERC, you can speak with one of our experienced Refund Specialists who can guide you through the process.

Absolutely. Non-profit organizations including charities and religious organizations, can claim the Employee Retention Credit if they meet the same eligibility criteria as for-profit businesses.

PPP was a forgivable loan. ERC returns the payroll taxes that your business has already paid. Once your business receives the ERC funds from the US Treasury, it does not has to pay back the credit.

The complexities arise because the ERC Credit is based on your company’s payroll returns rather than its income tax returns. The ERC tax code encompasses over 200 pages, and most CPAs lack the time and experience to maximize their clients’ ERC recoveries. This limited expertise among CPAs is the primary reason why this credit remains underutilized.

No, repayment is not necessary as the ERC Credit is not a loan. It is a refundable tax credit. When your ERC service files your claim, they will request a refund check on your behalf.

Tax refunds are disbursed by the US Treasury, ensuring eligible employers receive the funds they qualify for. Businesses had until January 31, 2024, to submit an amended return for claiming the ERC Credit for 2020 and 2021.

The ERC credit itself is not considered income for federal income tax purposes. However it is important to note that your business must reduce any deductible wage expenses by the amount of the ERC credit received. Therefore, it is recommended to provide the ERC credit information to your business’s CPA for income tax purposes.

Don’t be misled into thinking you can automatically claim the ERC credits. Qualification involves a specific process. If you believe you might be eligible, ensure you conduct thorough research by checking the guidelines on the IRS website. Attempting to claim with false documents or through the wrong company could have a detrimental impact on your ultimate objective.

The ERC was created as a refundable tax credit to incentivize employers to retain their employees. Although it presents an opportunity for businesses to explore, navigating the eligibility criteria and calculating the credit can be intricate. Mishandling these aspects can lead to substantial repercussions.

Taxpayers bear the responsibility for the accuracy of the information stated in their tax returns. If the ERC is incorrectly claimed, it could lead to taxpayers having to repay the credit, accompanied by penalties and interest.