Employee Retention Credit – What is it?

COVID-19 has been a challenge for all of us. As the world shut down the economy came to a halt, leaving the future of many small businesses in a precarious position. As we begin to find normalcy again, businesses now have to focus on recovering and fortunately, several government programs are easing this process.

The Employee Retention Credit (ERC) is a program created in response to the COVID-19 pandemic and economic shutdown which incentivizes companies and small businesses with a refundable tax credit for maintaining their payroll during 2020 and 2021.Due to the extremely complex tax code and qualifications, it is severely underutilized.

Details of the program include:

  • UP TO $26,000 PER EMPLOYEE
  • AVAILABLE FOR 2020 & Q1 – Q3 2021
  • QUALIFY WITH DECREASED REVENUE
  • OR QUALIFY WITH COVID EVENT
  • NO LIMIT ON FUNDING (ERC IS NOT A LOAN)
  • ERC IS A REFUNDABLE TAX CREDIT

ERC Qualifications

While the general qualifications for the ERC program seem simple, the interpretation of each qualification is very complex. Our significant experience allows us to ensure we maximize any qualifications that may be available to your company.

Full or Partial Suspension of Business Services

A government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel, or restrictions of group meetings.

Gross Receipts Reduction

Gross receipt reduction criteria are different for 2020 and 2021 but are measured against the current quarter as compared to 2019 pre-COVID amounts.

 

Check to see if you qualify for Employee Retention Credit

 

Frequently Asked Questions

 

Can’t I just have my CPA file?

Of course. The challenge is the ERC credit is taken on your payroll returns and not through your business income tax returns, which is what most CPA’s handle. Because of this most CPA’s don’t process this credit, unless they process your payroll in house. This is also a big reason why this credit is so underutilized. Since CPA’s don’t typically handle it and they are the tax experts, it has mostly fallen in a middle ground where few are able to effectively process the credit.

At Fundwise, the ERC Specialists have experience evaluating eligibility for this stimulus money and have successfully submitted hundreds of claims translating into thousands of refund dollars to small business owners. Our experiences with this grant program for small businesses has allowed us to understand and maximize the ERC program. In our experience we have found that due to the complexity (the ERC tax code is over 200 pages) and time investment necessary to understand the ERC program, it requires a dedicated team to effectively maximize this sizeable credit for your business.

 

Can I get ERC Funds if I already took the PPP?

Yes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, modified the ERC credit rules. One of the modifications included allowing a company to have a PPP loan and still take advantage of the ERC credit. However, you can’t use the same dollar for dollar funds. We take this into account when processing your ERC credit.

My revenue went up in 2020, can I still qualify for the ERC program?

Yes! There are two possible qualifications for 2020: revenue reduction, or a “full or partial shutdown of your business due to COVID-19”. Specifically the IRS describes this as “A government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel or restrictions of group meetings.” Below are several examples of qualifying events:

Example 1: A restaurant must close or limit its on-site dining. Such as having to close down every other table, due to COVID-19 restrictions.

Example 2: A business that needs to meet with clients in person and has to cancel meetings due to COVID-19 restrictions.

Example 3: A business has to reduce their operating hours because COVID-19 restrictions and cleaning requirements.

Example 4: A business had delayed production timelines caused by supply chain disruptions.

Example 5: A business with a planned event has to cancel that event, or restrict the amount of people who can attend due to COVID-19 restrictions.

I’m a CPA or a payroll company, can I refer my clients?

Yes. We also offer a referral/affiliate program. To learn more click here

How will I make payment?

We understand your refund check may not arrive for several months (20 weeks minimum according to IRS documentation), so we offer that the full fee can be deducted from your refund once received.

 

How much do you charge?

Our service charge is based on a percentage of the credit recovered. We calculate and provide our fee with our free analysis. Since we are typically able to recover more than someone less familiar with the program, our fee is very affordable. Just like a good CPA, using the right team for this process pays for itself.

 

I’m getting more in ERC Credit than I paid in taxes?

Remember that this program is taken according to payroll taxes paid, not on income taxes. ERC funds not applied towards owed payroll taxes are treated as an ‘overdeposit’ of taxes that will be requested as a refund check from the IRS.

 

As an owner do my wages, or the wages of any family member I employ qualify?

Maybe. Wages of owners who have majority ownership, defined as over 50%, do not qualify, nor do the W2 wages of any immediate family members of the owner. In the case an owner has less than 50% ownership, their W2 wages qualify, as do the W2 wages paid to immediate family members.

 

Can I qualify for the ERC if I’m self employed?

No, if you are majority owner (over 50%) of your company then your wages do not qualify.

 

How long does it take to get my ERC Credit?

This is how the process works: you send us the required documents and we process an analysis at no charge. The process from start to finish usually happens in 2-3 weeks. If you wish to move forward, you will be asked to pay an administrative fee in order for us to file your claim. Once filed, refunds are released based on IRS backlog. Currently, the IRS has stipulated a 20 week minimum turnaround on the ERC refunds.

 

Do I Have To Repay The ERC Credit?

No. This is not a loan. It’s a refundable tax credit. When we file your ERC claim we request a refund check for you.

 

Is the ERC Credit taxable?

The ERC credit is not considered income for federal income tax purposes, but you must reduce any deductible wage expenses by the amount of the credit. Please provide the credit information to your CPA for tax purposes.

**Disclaimer: I am an affiliate for Fundwise Capital and in no way represent their team or company. By using the links that I provide, I will receive a commission if/when you qualify and move forward with the ERC program. I promote Fundwise Capital ERC specialists service because of how many people it has been able to help.**