During the pandemic, the CARES Act provided several programs to help businesses. The best known was the Payroll Protection Program (PPP), which had two phases, and was extremely popular. Another program under the CARES Act was the Employee Retention Credit (ERC), sometimes known as the Employee Retention Tax Credit (ERTC). The ERC was nowhere near as popular as PPP, and at the time, an employer had to chose to do one or the other.
The ERC was vastly underutilized, so some changes were made. The first change was that having a PPP loan did not preclude a company from also getting an ERC. That helped.
But to qualify for ERC, the company had to have a 20 percent decrease in revenue, compared to 2019. For some companies, that opened the door. Two more qualifications were added. One related to start-ups.
But the one that opened the floodgates was a provision that qualifies an employer who had to change the way they did business due to Covid-related government mandates or restrictions. This makes almost every business that has W-2 employees eligible for this tax credit. If you closed your office and had people working remotely, you qualify. And the documentation needed to prove this is simply several edicts issued by Governor Inslee’s office.
For each employee, 50% of qualifying wages up to $10,000 per employee are eligible for 2020. In 2021, it goes up to 70% of qualifying wages per employee per quarter, at least for the first two quarters of the year. Some companies qualify for three or four quarters of 2021. Payroll used for PPP forgiveness can’t be used for this calculation, but excess wages can be used as can medical premiums, including the employee-paid portion of medical premiums
The credit can be as much as $26,000 per employee, although what I’m typically seeing is $14,000 per W-2 employee during Q1 and Q2 2021. Do the quick math and you’ll probably see that there is a lot of money to be had. In addition, unlike the PPP forgiven loans, these tax credits are taxable. But there is no limit to the size of the program; the government will not run out of funds.
Most clients have told me, “We don’t qualify.” That was true until the rules were changed. Now, virtually all businesses qualify. If you walk away from this opportunity, you’re being foolish.
Once the credit has been approved by the IRS, the credit is taken against payroll taxes. This can be done prospectively against tax deposits or by filing amended Forms 941X. The credits on amended 941X forms will take months to receive, according to the IRS. But you will get a check eventually.
This windfall was brought to my attention my two clients who received the credits. Some CPAs are providing this service, but I recommend using one of the many companies who have sprung up specifically to help companies get this free money.
The one I have experience with, and who I recommend, is: www.ERTCFiling.com. Full disclosure: I have registered with them as a referral source. If you tell them I sent you, I get a couple hundred-dollar referral fee. Taking referral fees is something I’ve never done before, but it seems to be the best way to handle this, as long as I disclose it.
If you go to the EFTCFiling.com website, you can sign up for a 30-minute initial phone call. After that, if you want to pursue the credit, you’ll be scheduled for a 90-minute Zoom call to aid you with providing the information needed to apply for the credit. You’ll pay a fee to ERTCFiling.com and they’ll provide the forms for filing. The fees I’ve been quoted seem very reasonable, especially compared to the credit amounts. They are flat fees, not a percentage of the credit.
The deadline for claiming the credit is the three-year limit on filing amended Forms 941X. For example, the Form 941 filed for Q1 2020, due in April 2020, must be amended by April 2023.
But why wait? Go get your credit and then tell me how it went. If you’ve got questions, hit Reply and let’s talk. You do not want to miss this; it really is more free money.
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