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Employee Retention Credit Q&A
WHAT IS IT?
- The ERC is a refundable and advanceable tax credit for small
businesses based on the number of qualifying employees
as part of the American Rescue Plan Act of 2021. - If eligible, businesses can claim the ERC for qualifying wages paid
during March 13th, 2020 – September 30th, 2021.
- This means the credit is available for wages paid in the following quarters:
- 2020 – Final few weeks of Q1. Fully for Q2, Q3, and Q4
- 2021 – All 4 quarters. (This may change slightly once the latest
infrastructure bill is passed but will still include quarters 1, 2 and 3).
DO I QUALIFY?
- To qualify for the ERC in a given 2020 quarter, a business must have
experienced either:
- At least a 50% decline in gross receipts in a given quarter compared to
the same quarter in 2019. OR - A full or partial suspension of business operations due to a government
order.
- To qualify for the ERC in a given 2021 quarter, a business must have
experienced either:1. At least a 20% decline in gross receipts in either:
a. A given quarter compared to the same quarter in 2019; OR
b. The immediately preceding quarter.
2. OR A full or partial suspension of business operations due to a government order.
For Q3 and Q4 of 2021 only, a business can utilize either of these special qualifying criteria:
Qualify as a Recovery Startup Business, meaning the employer:
- Began operations after February 15, 2020,
- The average annual gross receipts of the employer for the 3-year taxable period preceding the calendar quarter claiming the credit does not exceed $1,000,000, AND
- Does not qualify under the gross receipts or suspension of operations criteria above.
- A Recovery Startup Business is eligible for a maximum of $50,000 per quarter.
Qualify as a Severely Financially Distressed Employer, meaning the employer:
- Suffered at least a 90% decline in gross receipts in a specific quarter compared to the same quarter in 2019.
- A Severely Financially Distressed Employer can include all wages paid during the qualifying quarter for purposes of the ERC.
HOW MUCH IS IT?
2020 → Maximum credit is $5,000 per employee for the entire year. 50% of qualifying wages with a maximum qualifying wage amount of $10,000 per employee.
- 50% x 10,000 – $5,000 credit per employee.
2021 → Maximum credit is $7,000 per quarter, per employee – $21,000 total for the year. 70% of qualifying wages with a maximum qualifying wage amount of $10,000 per employee.
- 70% x 10,000 = $7,000 credit per employee, per quarter.
- Total → Up to $26,000 per employee.
FREQUENTLY ASKED QUESTIONS
Big picture answer: the American Rescue Plan Act of 2021 (signed March 11, 2021) authorizes up to $26,000 in refunds per employee, but that amount varies substantially based on no less than a dozen factors – timing of revenue declines, receipt of PPP loans & forgiveness, turnover of employees, etc. etc. Realistically, there is no reasonable answer for how much you can expect back until we run a few numbers. It ranges but the max amount a business can receive as previously stated is $26,000 per employee for the entire time period.
Since maximizing your Employee Retention Tax Credits is all the accounting firm we engaged does, we’ve made this incredibly easy to start. In fact, we’ve streamlined this process and will only require about 15 minutes of your time – from start to finish. Connect us with your team members who can provide us payroll reports and quarterly filings and we’ll take it from there. Our expert CPA’s determine eligibility, compute your credits, prepare your filings and provide audit documentation. At the conclusion, you’ll receive an Executive Summary and the amended Federal Returns to sign. We’ll continue to follow-up with you through the end of 2021 to ensure you claim all the refunds for every quarter that you’re eligible.
Our fees are based on a percentage of what we recover for you. Typically we charge a flat fee of just 20% of whatever we recover on your behalf. We don’t get paid until you get paid. Our fee isn’t due until you get your refund check from the U.S. Department of Treasury. (Did I mention how good it feels cashing a check from the Treasury that is not a result of you overpaying income taxes last year?)
Your Payroll Service does an excellent job of executing the fundamentals of paying your employees, paying your employment taxes and filing your quarterly reports.
But computing your ERC requires visibility into your P&L and PPP forgiveness applications. Not only that, but the complex requirements around eligibility and allocating ERC at the employee-level while accounting for annual and quarterly qualifying wage caps and . . . well, you can probably tell why Payroll Services are not offering to do all of this for you.
The Payroll Services are happy to provide the payroll registers that we need to perform the allocations. And they are happy to file the Amended Form 941-X with the IRS on our client’s behalf. For them to involve themselves in the intricacies of this calculation, could be a liability and beyond their scope of services.
Your tax accountant may not be knowledgeable enough to calculate and determine the full extent of your right to the ERC. Just as there are specialists among doctors, dentists and other professionals there are specialists among accountants. The accounting firm we engaged focuses exclusively on this once in a lifetime credit opportunity. They are the specialists you want to assist you in securing your tax credit. Your accountant’s practice is staffed to handle the current workload, not to handle these intricate calculations. With MMC, you can be assured that the work done will be done by people with a singular focus on maximizing ERC’s.
Employee Retention Credit Q&A
Macmoor Capital is assisting our clients with a special form of government aid called the Employee Retention Credit, which was part of the March 2021 American Rescue Plan Act which revised the original ERC program included in the CARES Act of May 2020, where and employer had to choose between Paycheck Protection Program and ERC. The 2021 legislation allows eligible employers to benefit from both or either of PPP and ERC. Some of our clients didn’t realize they can now use PPP and ERC, so we want to circle back now to be sure that you are aware.
ERC has been very lucrative to a number of our clients:
- Up to $26k per employee on payroll (depending on salaries)
- As much as $7k per employee per quarter in 2021 from 1/1/2021 and can continue to 9/30/2021 for a total of up to $21k.
- Retro back for 2020 for up to $5k per employee.
- Once activated, it will be in each payroll you process.
- The Government will issue refunds for the past back to 2020.
If you are not receiving ERC, we would welcome the opportunity to discuss the eligibility requirements and how to start the program. We will manage it from end to end for you. We can get you up and running at no up front cost to you with funds in your bank account as soon as the refund is issued.
We can help you through the myriad of complexities that may pertain to your company’s unique situation such as the following:
- Group size
- Aggregation affiliation rules
- International nuances
- Furloughed employees
- Eligible costs besides wages such as healthcare & pension
- Full or partial eligibility for all or our part of the program’s 21 months
- What constitutes a Recovery Startup Business under the program and how that may affect you
- Rules governing part time employees
- Analyzing the mathematical sweet spot to maximize PPP forgiveness and ERC credits
Macmoor Capital, LLC / For informational purposes only / Information is subject to change