You may think you know about employee retention credit programs, but you may not have heard the full story.
Even experienced tax professionals have found themselves reluctant to address the details of the ERC despite the obvious opportunities it presents. Instead, we advocate the use of professionals with specific experience. This has created a niche industry of these specialist operators, helping business owners realize the benefits of this federal stimulus program. As a result, companies like ERC Provider have emerged to help companies navigate the details of this valuable federal program.
What is ERC?
The ERC program is an element of the CARES Act passed by Congress in response to the Covid-19 crisis. This allows the company to receive tax credits of up to $26,000 for each of her W-2 employees. It’s not a loan, it’s a direct payment to the company. Businesses under the Paycheck Protection Program and the Economic Injury Disaster Loan are also eligible to benefit from the ERC. Decreased revenue is just one way to qualify, and 80% of businesses qualify based on other shutdown-related impacts.
The program is designed to benefit employers who have hired or otherwise retained their employees during the worst of the pandemic. It has evolved to expand eligibility for companies utilizing other parts of the CARES Act, providing significant opportunities for many companies not only to survive but to thrive.
As a refundable tax credit, businesses of all kinds benefit from this program, including hotels, gyms, transportation companies, retailers, and hospitality businesses that employ both full-time and part-time workers.
Why are CPAs seeking help from outside firms?
Many tax professionals recognize the benefits of the ERC, but taking advantage of the program requires specific expertise. It requires a set of payroll tax returns that most CPAs are unfamiliar with or completely unsure of using. As a government program, the ERC application process can be complex and confusing. Some business owners and even her CPA often express concern about the consequences of unintentional mistakes.
Even if you looked at the ERC in the early days of Covid-19, you might be pleasantly surprised when you take another look at it today. The ERC will be significantly expanded for his 2021 tax year, increasing the cap to $7,000 per employee in 2021 and increasing the definition of “small business” under the program from 100 to 500 employees. expanded to
Groups specializing in ERC programs can define eligibility and guide clients through the application process. The ERC attestation process is qualitative and quantitative and requires in-depth interviews with the business owner to determine how the impact of the closure aligns with his ERC regulations. The quantitative portion of the filing is completed by a dedicated payroll tax expert who analyzes a company’s detailed payroll information to get the most credit possible. Most companies consider the program to be straightforward if you are guided step by step through the process without being exposed to any risk and only being charged a small percentage of the payments collected.
How is this niche service expanding?
Payroll tax firms, law firms, tax credit professionals, and other organizations are adding ERC services to their offerings. There are also companies dedicated to ERC filing, like ERC Providers, which have served thousands of US companies. Many companies offer referral programs to CPA and accounting firms so that clients can benefit from sending them to these he ERC specialist firms for assistance.
The ERC program was a windfall for some companies, but for others it made the difference between maintaining a successful business or closing the door for good. If you haven’t been able to help your client with her ERC yet, or don’t want to take time off from practice to focus on this credit, there are new solutions. A CPA and accounting firm can now partner with an ERC specialist firm to offer her ERC services to her clients while avoiding the extra work and responsibility of handling ERC filings herself.
This article does not necessarily reflect the opinions of The Bureau of National Affairs, Inc., publishers of Bloomberg Law and Bloomberg Tax, or their owners.
Author information
Sunshine J. Chapman President and Founder of ERC Provider, a specialized niche consulting firm that helps companies navigate the details and realize the benefits of their ERC programs.
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