10 Myths About ERTC (Employee Retention Tax Credit) Explained

 

These are only the top 10 Myths heard regularly by any person offering ERTC services. This is not a comprehensive list. The explanations are understanding of WCO Business Solutions of the basic of this tax code. The Code itself is over 80 pages of circumstances and a Professional Tax Accountant or CPA should be consulted to complete the 941 Payroll Tax Amendments required to claim this credit. There will be a link at the end of this PDF if you wish to pursue this credit.

 

Myth 1: “My Business is NOT eligible because we made a profit during the pandemic.”

Truth: Really that is not a deciding point for this credit. A Business can turn a profit during the pandemic and still be eligible. A decrease in Gross Revenue is just that DECREASE. That doesn't mean the business was not profitable, it means they saw a decrease in GROSS REVENUE.

                50% Decrease in Gross Revenue in 2020 as compared to same quarter in 2019

                20% Decrease in Gross Revenue in 2021 as compared to same quarter in 2019

Myth 2: “I didn’t have to shut down during the pandemic so I can’t get the credit.”

Truth: You may not have had to shut down but what else affected your business? Did you have a supply shortage because a key supplier did have to shut down? Did you have a change in operational standards because of Social Distancing or Shelter in Place Mandates? These are also considered Negative Impacts because of Government Mandates.

Myth 3: “I got the PPP loan for my business; I can’t take the ERTC.”

Truth: Whereas this used to be true, the code was modified in June 2020 to allow businesses who received the PPP loan to also be eligible for the ERTC. A couple of things you should be aware of. First, you can still be eligible, but the amount per employee may be reduced. Second, just because you received the PPP does not mean you will receive the Credit, it means you can.

Myth 4: “It takes too long to get the credit.”

Truth: That entirely depends on your definition of “Too Long”. Typically, it takes between 4 and 6 months to receive your credit to your account. This is due to the high volume of these filings going to the IRS. The IRS has to check them all and make sure they are following all the rules. In the introduction I told you the code was over 80 pages. This takes a while to complete, therefore, it will take a few months to get your credit back.

Myth 5: “The Credit will not really help my business.”

Truth: The max credit per employee is $26,000.00. it breaks up to $5,000 per employee for the last 2 quarters in 2020 and $7,000.00 per employee each quarter in 2021. This can be decreases by other factors, but the average credit per employee has been between $15,000 and $20,000. For a business that has 10 employees that is between $150,000 and $200,000. That could be a new marketing campaign, new equipment for your business and more.

Myth 6: “It cost too much to file for the Credit.”

Truth: That depends on who you use to complete the credit for you, and you should have a professional complete the credit for you. Most agencies charge between $2,000 and $6,000 to review documents and make sure you’re eligible. Then they charge between 15% and 30% of the credit once you receive it. I personally have seen the last charge at 40% with one company. There are a select few that are not charging the up-front fee to make sure you are eligible. The link at the end of this PDF is one of those companies.

Myth 7: “My Accountant said I cannot file because I have Family working for me.”

Truth: If you ONLY have family working for you then, yes, your Accountant is absolutely correct. However, if you have other W-2 Employees working for you besides your family, those employees count! You will just need to notify the preparer who the family employees are and what their relationship with you is. The relationship is important. If they are not Parents, Children, or spouses they may still qualify.

Myth 8: “I pay Commission to my Employees, so I am not eligible.”

Truth: As long as those employees are W-2 employees, and you pay 941 Payroll Taxes on them you are still in the running. The only employees who do not count are 1099.

Myth 9: “I have heard all of these agencies are a scam and people are having to pay all the money back.”

Truth: You do have to be careful what agencies you use, there are a lot of them out there who do not completely understand the code and are getting money for their clients they shouldn’t. You also have to be careful with licenses CPAs and Tax Accountants too. Where there is good there will always be something or someone who tries to ruin it for everyone. Here are a few ways to know you have a reputable company.

·         Are they transparent about cost?

·         Do they have a CPA team who will complete the documents

·         Do they give you an audit protect document (how they came to their numbers and what parts of the code you qualify under for the amount you received.)

·         Do they communicate regularly with you

Myth 10: “If I file for this Credit, I will owe more Payroll Taxes next year because it is a really a loan.”

Truth: This credit is NOT a loan. This is a credit businesses are entitled to who kept their employees and businesses running through the pandemic. It is a credit given back to you on your Payroll Taxes. Any and all other Tax implications should be explained to you by the professional you choose to work with before they file your amendments and sign a contract.

 

I hope this has been helpful for you to make a better-informed decision about ERTC and your business. If you feel you may be eligible and would like to talk more about it, please reach out to me one of two ways. You can call @234-249-1993 Monday – Thursday from 9:00am EST to 9:00pm EST. You can email me @ KSprinkle@wcobusinesssolutions.com with a subject line of ERTC Questions.

If you are prepared to start the process right now you may do so at https://davidallencapital.com/taxcredit/102547175 You will fill out a brief questionnaire and if you are a good candidate for ERTC you will be sent to ERCPRO’s system to begin. You will need to fill out all of their questions as completely as possible. Once you have done that you will have an Estimated Credit Amount, you will also receive an Email from ERCPROs with a link to your secure portal to upload your documents. (If you need help with this part, you are welcome to call me @234-249-1993 I am happy to help) You will need the following Documents to upload Form 941 Payroll Taxes, P&Ls from 2019-2021, full Payroll Report with all earnings for all employees from 2019-2021, and any PPP Loan paperwork you may have if you received any round of PPP. ERCPROs may ask for other documents to help prove your eligibility. Please make sure you upload any all documents they request in a timely manner as it will only help you receive your credit faster.

 

Again, you are always welcome to contact me first and I would be happy to walk you through the process. We can hop on a Zoom Call, and I can walk you through each step as we get to it.