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At Last! Employee Retention Credit Facts And Common Misconceptions Business Owners Must Read

How have so many business owners missed out on claiming tens and hundreds of thousands of dollars available in ERC funds?

Take 2 minutes to understand these 5 key aspects below that business owners must know about ERC:

1. What is the Employee Retention Credit.

2. Refund amounts available per employee for 2020 & 2021.

3. 5 myths and misconceptions that caused accountants to miss out on filing for eligible business ERC funds.

4. How to file an ERC claim without getting overwhelmed and get your refund money fast. *It’s not too late.

5. Professional assistance to quickly verify if your business has missed out on claiming ERC tax credits it’s eligible for.

1. What is The Employee Retention Credit?

The Employee Retention Credit was implemented to encourage businesses to keep employees on their payroll while dealing with the aftermath of COVID for years 2020-2021.

These funds can still be claimed with a filing now in 2022!

2. Exactly How Much Can Employers Get a Refund Check For?

For 2020 this refundable tax credit can be as much 50% of employee wages paid, up to $10,000 per employee for March 13th to December 31,2020.

For 2021, the tax credit increases to 70% for employee wages paid through the end of 2021, including some health insurance costs.

The CAA(Consolidated Appropriations Act) implemented for 2021 makes this credit available for a maximum of $21,000 for year 2021. It considers $10,000 in wages per employee, per quarter during the first two quarters of 2021.

*We’ve seen that the average retention credit per employee is $16,000, but many businesses have qualified for millions of dollars. To calculate an estimate of how much your business could receive, multiply $16,000 by the number of employees you retained on staff each year. For example, if you have 100 employees, you could receive up to $1.6 million per-year of eligibility.

3. 5 Myths and Misconceptions That Caused Accountants and Businesses to Miss Filing For Their ERC Refund.

Misconception #1: “The business received PPP funds so it’s not eligible to claim ERC refunds.”

Truth: You can file for both! Congress removed the limitation on only claiming one or the other with the Consolidated Appropriations Act (CAA) of 2021. The IRS implementation of The Revenue Procedure 2021-33 provides employers safe harbor to exclude the amount of:

Forgiveness of a PPO loan
Amount of a Shuttered Venue Operators Grant
Amount of a Restaurant Revitalization Fund Grant

That means these funds do not need to be part of gross receipts when determining eligibility to claim ERTC. Safe harbor must be applied across all entities.

This leaves plenty of uncovered wage expenses for claiming ERC refunds.

Misconception #2: “A business must have had a drop in gross receipts of 50% or more compared to 2019.”

Truth: That’s not accurate because with the implementation of the CAA in 2021 a businesses’ gross receipts for 2020 or 2021 can reflect a 20% lower per-quarter total than the same quarter in year 2019 to be eligible. PLUS, it’s important to know there is another way to qualify not related to your gross sales receipts being down. See the point below.

Misconception #3: “The business was not shut down during the pandemic so it won’t qualify for ERC tax credit refunds.”

Truth: There are actually several aspects that make this simple assumption inaccurate. For example a suspension ordered by federal, state, or local government(even if partial in nature) that impacted your business could potentially allow you to qualify. Here’s a long list of factors that you should evaluate: Did you face business impacts due to a partial shutdown, a disruption in your business due-to vendor being shut down or supply chain issues, being unable to access equipment, forced to endure limited capacity, a reduction in the services your business offered, a reduction of hours to accommodate additional required COVID sanitation, or having to shut down of some your business locations and not others? These are all scenarios that still potentially qualify for the ERC.

The key considerations are – “due to the government ordered partial (or full) suspension was your business not able to continue its activities in a comparable manner to prior conditions, and did that result in a more than nominal impact on business operations”. *It’s important to remember that the impacts of a direct partial or full suspension is an alternative way to qualify for the ERC — separate from the reduction in gross receipts test.

Misconception #4: “The business was in losses, or did not have any tax liability so it won’t qualify for ERC tax credit refunds.”

Truth: This is a refundable credit. This concept means that any credit overage above your businesses’ tax liability would actually be sent to the business owner as a refund.

Misconception #5: “The company has grown to over 500 employees, so we are not eligible for the ERC.”

Truth: The employee count restriction that’s in reference is based on full time equivalent (FTE) employees, which is a more complex calculation than just counting everyone working in the business wholistically. Many businesses assume they’re too large, but we find that with the FTE consideration analyzed properly that most miscalculated their employee count.

IMPORTANT note, if you paid any employees to NOT work, or to work less-than the hours for which they were paid, then the full time employee.

4. How to file an ERC claim without getting overwhelmed and get your refund money fast.

In order to avoid the headaches and heartache it’s best for a business to have legal counsel file for the ERC refund and properly provide synchronous documentation that will “paper” exactly how the business qualifies for the ERC.

Why? Let’s be honest, the IRS doesn’t make filing for any refundable credit that involves real dollars simple and you can bet they’ll require thorough comparative documentation.

While the ERC is a refundable tax credit – with huge benefits, it is not as easy as calling up your tax advisor and having them create a simple form where they check a few boxes that the IRS will happily accept.

5. Professional assistance to quickly verify if your business has missed out on claiming ERC tax credits it’s eligible for.

At The Jones Law Firm, our team is ready to help you quickly conduct an in-depth anlysis to fully understand the Employee Retention Tax Credit (ERC) funds you might qualify for.

We can guide and help you investigate your claim of eligibility, determine your potential tax credit, and then file the claim for your refundable ERC tax credit.

If you’re unsure that you’ve claimed eligible funds or that your accountant conducted the filing correctly then don’t hesitate to reach out. You could be leaving hundreds of thousands on the table, literally.

Click here to find out if you are eligible today!

Feel free to check out our blog about common ERTC FAQ’s.