alliantgroup Dispels 10 Myths about the New Employee Retention Credit
The Employee Retention Credit (ERC) was updated for 2021 and is now one of the most powerful sources of federal relief for businesses but there is a lot of misinformation swirling around it. Many businesses are wrongly disqualifying themselves and many businesses think it’s safe to just fill out a form to claim it.
1. I can’t claim ERC if I’ve already claimed PPP
Now you can claim both! The Consolidated Appropriations Act (CAA) of 2021 removed the limitation on only claiming one or the other.
2. My payroll service provider or CPA can handle this
CPAs are focused on your Federal Income tax and not your payroll taxes. Meanwhile most payroll companies will ask you to do all the work to earmark who you want to claim the credit for and will not perform an employee by employee analysis on whether you are maximizing or double claiming your available benefits.
3. My PPP loans were forgiven so I can’t be eligible for this
PPP will only account for 2.5 times your monthly payroll expenses and is meant to be spread out over 6 months. This leaves plenty of uncovered wage expenses for claiming ERC.
4. My business did not have a drop in gross receipts of 50% or more
The CAA has changed the qualifications so that a reduction of 20% now qualifies.
5. My business was not shut down during the pandemic
Even a partial suspension or impact to your business would qualify. For instance, a partial shutdown, a disruption in your business, inability to access equipment, having limited capacity, shutdowns of your supply chain or vendors, reduction in services offered, reducing hours to accommodate sanitation, shut down of some locations and not others, and shutdowns on some members of a business are all scenarios that still qualify for the Employee Retention Credit.
6. My company was deemed an essential business, so I do not qualify because of business suspension
Even if you are deemed essential, an impact or change in your business may still qualify you. Even if you were open but your vendors were closed down or you can’t go to a client’s job site, you may still qualify. The scenarios above in Myth 5 would apply here as well.
7. My company has grown during quarantine, this isn’t something I should take
Great news! If your company has grown during quarantine but experienced a full or partial shutdown, there are expenses you can still qualify for!
8. Sales have rebounded for us in Q1 of 2021, I can’t qualify for this credit
With the introduction of the CAA, you have the option to look at one quarter prior to determine qualification. This means we can determine eligibility based on lost revenue in 2020. Also, if you were subject to a shutdown you may qualify regardless.
9. We were in losses, or do not have any tax liability
This is a refundable credit against payroll taxes. Meaning any credit overage above tax liability is sent to the taxpayer as a refund.
10. My company has grown to over 500 employees, we are not eligible
The employee count restriction is based on full time equivalent (FTE) employees which is a more involved calculation than just counting everyone in the office. We helped a business with 640 employees and the FTE calculation put them at under 500. Furthermore, if you paid any employees to NOT work, then the employee count restriction would not apply for those employees.
The expansion of the Employee Retention Credit now makes it available to so many more American businesses that need it. Applying for the credit, however, is not as simple as filling out a form, it requires an in-depth employee by employee analysis, substantiation of suspension basis, and careful consideration for other payroll incentives. alliantgroup’s experts will do the heavy lifting for you to ensure you maximize the benefit you receive.
Reach out to us today. Call us at 844-524-0077 or visit us at www.alliantgroup.com
Authors:
MARK W. EVERSON
Former IRS Commissioner
STEVEN T. MILLER
Former IRS Acting Commissioner
KATHY PETRONCHAK
Former IRS Commissioner of Small Business/Self-Employed Division
Download/Print the Full Article
Download/Print the One-Page ERC Flyer
1. I can’t claim ERC if I’ve already claimed PPP
Now you can claim both! The Consolidated Appropriations Act (CAA) of 2021 removed the limitation on only claiming one or the other.
2. My payroll service provider or CPA can handle this
CPAs are focused on your Federal Income tax and not your payroll taxes. Meanwhile most payroll companies will ask you to do all the work to earmark who you want to claim the credit for and will not perform an employee by employee analysis on whether you are maximizing or double claiming your available benefits.
3. My PPP loans were forgiven so I can’t be eligible for this
PPP will only account for 2.5 times your monthly payroll expenses and is meant to be spread out over 6 months. This leaves plenty of uncovered wage expenses for claiming ERC.
4. My business did not have a drop in gross receipts of 50% or more
The CAA has changed the qualifications so that a reduction of 20% now qualifies.
5. My business was not shut down during the pandemic
Even a partial suspension or impact to your business would qualify. For instance, a partial shutdown, a disruption in your business, inability to access equipment, having limited capacity, shutdowns of your supply chain or vendors, reduction in services offered, reducing hours to accommodate sanitation, shut down of some locations and not others, and shutdowns on some members of a business are all scenarios that still qualify for the Employee Retention Credit.
6. My company was deemed an essential business, so I do not qualify because of business suspension
Even if you are deemed essential, an impact or change in your business may still qualify you. Even if you were open but your vendors were closed down or you can’t go to a client’s job site, you may still qualify. The scenarios above in Myth 5 would apply here as well.
7. My company has grown during quarantine, this isn’t something I should take
Great news! If your company has grown during quarantine but experienced a full or partial shutdown, there are expenses you can still qualify for!
8. Sales have rebounded for us in Q1 of 2021, I can’t qualify for this credit
With the introduction of the CAA, you have the option to look at one quarter prior to determine qualification. This means we can determine eligibility based on lost revenue in 2020. Also, if you were subject to a shutdown you may qualify regardless.
9. We were in losses, or do not have any tax liability
This is a refundable credit against payroll taxes. Meaning any credit overage above tax liability is sent to the taxpayer as a refund.
10. My company has grown to over 500 employees, we are not eligible
The employee count restriction is based on full time equivalent (FTE) employees which is a more involved calculation than just counting everyone in the office. We helped a business with 640 employees and the FTE calculation put them at under 500. Furthermore, if you paid any employees to NOT work, then the employee count restriction would not apply for those employees.
The expansion of the Employee Retention Credit now makes it available to so many more American businesses that need it. Applying for the credit, however, is not as simple as filling out a form, it requires an in-depth employee by employee analysis, substantiation of suspension basis, and careful consideration for other payroll incentives. alliantgroup’s experts will do the heavy lifting for you to ensure you maximize the benefit you receive.
Reach out to us today. Call us at 844-524-0077 or visit us at www.alliantgroup.com
Authors:
MARK W. EVERSON
Former IRS Commissioner
STEVEN T. MILLER
Former IRS Acting Commissioner
KATHY PETRONCHAK
Former IRS Commissioner of Small Business/Self-Employed Division
Download/Print the Full Article
Download/Print the One-Page ERC Flyer