But let me dig into the details here so you know whether your firm qualified. And so you know what your firm needs to do to get any refund you missed. One comment here too: The refunds get big fast. If you qualified you’re probably talking tens or even hundreds of thousands of dollars of refunds.

First Some Background About the ERC

The Coronavirus Aid, Relief, and Economic Security Act (Cares Act), enacted in March of 2020, provided several aid packages for employers and employees. The primary goals were to keep businesses afloat and prevent employee furloughs.

Initially, employers had to choose between two programs, the Paycheck Protection Program or Employer Retention Credits. You could not participate in both.

The PPP program generally provided more money to business owners, and, not surprisingly, became the more popular choice.

In December of 2020, however, Congress passed the Consolidated Appropriations Act (CAA). And the CAA allowed businesses to participate in both the PPP and the ERC. Tax practitioners and employers then scrambled to learn about the ERC program in early 2021.  And as we all learned, there was serious aid money available to qualified employers.

A final thing to know up front. Employers potentially got ERC funds, or employee retention credit refunds, for wages paid in 2020 and in 2021. But the ERC deadline for refunds based on 2020 wages ended roughly a year ago. What I’m talking about here then are ERC refunds for 2021 wages. But that’s okay. That’s where the big money is.

How to Qualify for ERC?

To qualify for the ERC, businesses must generally meet one of three criteria:

1. Significant decline in gross receipts, or
2. Full or partial suspension of operations due to a government closure order, or
3. Start a new trade or business after February 15, 2020 and before the end of 2021.

From a practitioner’s perspective (and based on experience with many ERC claims), qualifying via a significant decline in gross receipts is usually easiest to substantiate and prove to the IRS. For 2021, an employer needed a decline of more than 20% in gross receipts compared to the same quarter in 2019.

Government shutdown orders, the second way to qualify, introduce nuances that can complicate qualification and implementation. If you’re interested, you can read more about ERC and government shutdown orders here. But you probably want to know that much of the ERC fraud appears to have involved employers alledgedly qualifying based on government orders.

The third way to qualify is to start a new trade or business. To qualify for an ERC refund based on starting a new trade or business, you need to be a small business with average gross receipts over three previous years equal to $1,000,000 or less. This revenue limit looks at the total revenues from all your businesses. And you get the ERC refund based on the wages paid in any of the businesses.

Qualified Wages for ERC

Not all wages qualify for employee retention credits. Some do. Some don’t.

Qualified wages for ERC in 2021 include the following:

• Wages subject to FICA taxes
• Certain health plan expenses allocable to wages
• Employers had to have 500 or fewer employees

Non-Qualified wages for ERC include:

• Wages that were used for PPP
• Greater than 50% owner wages
• Greater than 50% owner family member wages (spouse, children, grandchildren, parents, siblings, in-laws etc.)

How is ERC Calculated

The 2021 ERC formula works differently depending on the credit.

If you qualify based on either a substantial decline in gross receipts or a goverment order, the ERC equals 70% of qualified wages, up to $10,000 per employee per quarter for the first, second and third quarters of 2021.

Example: Suppose in 2021 you have three employees earning $12,000 each quarter throughout the year. Qualified wages in this case equal $10,000 per employee per quarter for quarter 1, quarter 2 and quarter 3. The ERC in this case equals $10,000 × 70% × 3 employees or $21,000 per quarter. So $63,000 in total.

The startup business employee retention credit only applies to the third and fourth quarter of 2021. And the startup business employee retention credit tops out at $50,000 per quarter.

Example: A small construction company enjoys roughly $800,000 of average annual gross receipts. The owner invests in a rental property in late 2020 (so, a new trade or business.) The aggregated business doesn’t qualify for ERC refunds on the basis of either a substantial decline in gross receipts or a government closure order. But it does qualify because a new business started: the rental property. Say the construction company employed ten employees earning $12,000 each in quarter 3 and quarter 4 of 2021. The ERC in this case equals the greater of either $10,000 x 70% x 10 employees, or $70,000 for quarter 3 and $70,000 again for quarter 4., or $50,000 a quarter. In this case, the actual credit equals $50,000 a quarter for the third and fourth quarter, or $100,000 in total

ERC Deadline Depends on Year

The deadline to amend returns and claim the refund depends on the year.

For 2020 ERC claims, the ERC deadline was April 15, 2024. Accordingly, employers cannot still make claims based on 2020 wages.

For 2021 ERC claims, however, the ERC deadline is April 15, 2025. Employers can therefore make claims based on 2021 wages.

Thus, if you operated a small business in 2021, had employees, and never took advantage of the ERC program, reach out to your CPA or tax preparer now. You potentially have large ERC refund claims that will shortly expire.

Also if you started a new trade or business in 2020 or 2021, check in with your CPA or tax advisor. Many small business employers will also qualify for ERC refunds based on this lesser known method.

Tip: If your tax advisor wasn’t able to help you? Or if you’re a tax professional who didn’t gear up to provide this service? We’d be happy to talk about providing you or your client with help. The ERC refund program has restarted. You should have time to apply before the deadline. Contact us here: Nelson CPA inquiry form.

Two Final Words of Caution on ERC Claims

First, carefully vet anyone you engage for ERC work. Unfortunately, the program has been exploited by some (many?) unqualified ERC “mills” that have prepared allegedly fraudulent claims, often leading to significant consequences for businesses. Also if you believe you may have been a victim of ERC fraud, address the issue promptly. (The IRS has a voluntary disclosure program that allows businesses to rectify improper claims and potentially mitigate penalties. You can find more information about this process on the IRS Voluntary Disclosure Program webpage.)

But another caution or suggestion: Don’t not apply for ERC refunds if you legitimately qualify. The ERC has provided life-changing financial relief for many businesses. The window to claim these credits is still open. Therefore don’t miss your chance to file before the April 15, 2025 ERC deadline.

Other Resources

The rules for determining whether you had a substantial decline in gross receipts provide you more flexibility and wiggle room that I describe in the paragraphs above. This blog post gives more detail: 16 Ways of Qualifying for Employee Retention Credits.

More information about the startup business  employee retention credit appears here: Startup Business Employee Retention Credit and here: The $100,000 Real Estate Employee Retention Credit Windfall.

Many houses of worship qualified for employee retention credits. If you participate in a faith community where your group was affected by government closure orders, you may want to research this more specialized situation. This blog post provides more details about what went on in Washington state and should be applicable to many other states as well: Washington State Houses of Worship All Qualify for Employee Retention Credits.

The post April 15, 2025 ERC Deadline Approaches appeared first on Evergreen Small Business.

You wondered at the time whether it was a scam, right? And now you regularly see news reports about ERC scams. Employee retention credit scams, that is.

And so two questions. Did you get scammed? And if so, what should you do at this point? Fortunately, you can probably answer these two questions pretty easily.

Note: This blog post has been updated for the additional guidance the IRS provided on October 19, 2023.

Did You Get Conned or Scammed?

You or your business qualifies for an employee retention credit in one of three ways:

First way: You’re a small business and you started another, new business sometime after February 15, 2020 and before the end of 2021. (That’s easy, right? You know if you did this.)

Second way: Quarterly revenues, as compared to 2019, collapsed. To qualify for 2020, the collapse needs to exceed 50 percent. To qualify for 2021, the collapse needs to exceed 20 percent. (Your accounting system lets you make these determinations with roughly three or four clicks of a mouse.)

And then the third way you qualify: If a government order triggered either a full or partial suspension in your business. And this method? Where the nonsense seems to occur. The place where ERC scams show up.

Fortunately, you can easily determine your eligibility for an ERC based on a government order. You just need to pull out the actual government order that either fully closed your business for some period of time. Or you need to pull out the actual government order that partially closed your business for a period of time—and then show that the partial closure reduced the hours of service or revenues by at least 10 percent.

And now here’s the cold reality. Too often? We see situations where no government order actually exists. I kid you not. And when that’s case? Yeah, sorry. No easy way to say this. But I think you’ve very possibly gotten caught in an ERC scam.

Note: Here’s an example of an actual government order from Washington state: Proclamation by the governor: Stay Health Stay Home.

Real-life Example of ERC Scams

You see all sorts of sloppy thinking regarding government orders.

For example, in one case, a business owner prominent in his industry circulated an email that talked about a government order hitting a major supplier of his firm and similar firms. We understand numerous employers filed millions of dollars of ERC refund claims based on this email.

But when we checked? No government order existed. In fact the supplier, helpfully, said so on their website. Explicitly.

Note: A clarification: A government order “counts” for purposes of employee retention credits if it affects your business… or vendors you get supplies from… or vendors of vendors you get supplies from. A government order that affects your customers does not matter for purposes of your ERC eligibility however. (It might negatively impact your revenues of course–which is another way to qualify.)

Double-check You Got Caught in ERC Scam

So your first step is obvious, right? Find or see if the ERC consultant worked from a real government order. Get a copy. Read the copy and make sure it either closed your operation down. Or it closed down the operation of a vendor in your supply chain and the impact was more than nominal.

And if you can find this document? Count yourself lucky. Because many of your small-business-owning brothers and sisters appear to have claimed employee retention credits when no government order existed. You however should be fine. Not so for people who don’t have a government order.

Take These Steps If You Actually Were Scammed

If you did claim ERC refunds you were not entitled to? You need to take several steps to dial down the damage.

First, if the federal quarterly payroll tax returns—which is where an employer claims employee retention credits—have not yet been filed? I think you stop that process. This may mean instructing the “consultant” preparing the amended returns to stop. You probably want to tell them explicitly that you now believe no government order exists if that is case.

Second, if the federal quarterly payroll tax returns have been filed? But you haven’t received a refund? I think you withdraw your refund request using the procedure desrcibed here:  Withdraw an Employee Retention Credit Claim. Note that the process works very simply in most cases: You make a copy of the 941-X form used to file the ERC refund claim, write “Withdrawn” into the left margin and then have an authorized person sign, give a title, and date the withdrawal using the right margin. You then, quoting from the IRS instructions, “Fax the signed copy of your return using your computer or mobile device to  the IRS’s ERC claim withdrawal fax line at 855-738-7609.”

Third, if the IRS has already processed ERC refunds and you now know your firm was not eligible? You want to amend any tax returns that reflect the erroneous ERC refunds. For example, you want to amend the 941 quarterly payroll tax returns again and then repay the tax refund. That will get you square with the Internal Revenue Service and stop the compounding of penalties and interest.

Another example: If you amended your 2020 and 2021 income tax returns to report the refunds as income (which is required), you want to amend your income tax returns and remove that income. This will reduce your income tax liability for 2020 and 2021 and get you a refund while you still can.

Other Resources

We’ve got a bunch of blog posts about how employee retention credits work here. If you’re concerned you didn’t know enough or still don’t know enough about employee retention credits, check these out to provide yourself with the information you’ll need to get out of this mess.

If you’re a tax practitioner who now needs to do a deep dive into the law, pick up a copy of Maximizing Employee Retention Credits from Amazon.com. (You will have a number of clients who need help with this if your firm is anything like ours. Sorry.)

If you’re an employer who got into trouble on this area? Check first with your CPA to see if he or she can help you get out of the mess. If that doesn’t work, we do have an ability to help a limited number of taxpayers. You can make contact with our firm here:  Nelson CPA PLLC.

The post If You Got Conned in ERC Scam appeared first on Evergreen Small Business.

I have some good news for you.

Your faith community almost surely qualifies for employee retention credits if it paid W-2 wages subject to Social Security and Medicare taxes. Big ones. And that’s even if you’re a small group.

Why Houses of Worship All Qualify

Employers qualify for employee retention credits in a variety of ways. But one way? When a government order either fully or partially suspends operations.

So what that means? Well, you qualify. Probably.

The March 23, 2020 proclamation from the Washington State Governor, which prohibited faith communities from gathering, counts as a full suspension from March 23, 2020 through January 11, 2021.

And then the January 11, 2021 proclamation, which amended the original closure order with those three “phases” based on infections? That counts as a partial suspension from January 11, 2021 through June 30, 2021.

Thus, nearly every Washington state house of worship qualifies. Especially those located in King, Snohomish, and Pierce counties.

An Exception to the Rule

The one exception to the “everybody qualifies” rule? Faith communities with more than 100 employees in 2020 and more than 500 employees in 2021 including those where the employer is not a single house of worship but a larger ecclesiastical entity.

For example, the Roman Catholic Archdiocese of Seattle is the Washington state employer for that community of churches. Not the individual churches or organizations.

These large employers face a different set of rules not discussed here.

But for nearly everybody else? You almost surely qualify.

Employee Retention Credit Refunds Probably $50,000 to $200,000

The employee retention credit formula calculates surprising large refunds based on W-2 wages subject to Social Security and Medicare wages.

Note: Salaries paid to ministers may not be subject to Social Security and Medicare taxes.

Most employers get up to 50 percent of the first $10,000 paid to an employee in 2020 while fully or partially suspended. Usually that means $5,000 for each employee in 2020.

Most employers also get up to 70 percent of the first $10,000 paid to an employee in a quarter of 2021 while fully or partially suspended. Usually that means $14,000 for each full-time employee paid in 2021. And then 70 percent of the wages paid to part-time employees during the first half of 2021.

These amounts add up fast. Commonly, we see $50,000, $100,000 or even $200,000 in total employee retention credit refunds.

Note: Often ordained clergy don’t get paid W-2 wages. Rather they receive self-employment earnings and a housing allowance. The employee retention credit however applies to W-2 wages. Not these other forms of income.

Paycheck Protection Program Loans Don’t Matter

A clarification: Some people think if an organization received a paycheck protection program loan, it doesn’t qualify for employee retention credits. That understanding is incorrect. Or more accurately out of date.

The “you can’t double-dip” rule applied in the beginning. But Congress later changed the law.

Claiming the Employee Retention Credit

If you haven’t claimed employee retention credits you’re entitled to? Not a big problem.

You need to amend the quarterly 941 payroll tax returns you file with the Internal Revenue Service.

In a nutshell, you simply add the employee retention credits you’re entitled to to the return. That creates a refund. You then file the return. And a few weeks or months later, the IRS will send you the check.

The one thing you do need to do is explain why you’re entitled to the refund. You’re getting a lot of money back, probably. So you need a detailed statement. Like the one that appears in the next section.

You have our permission to copy and paste the statement that appears below into your amended 941 payroll tax return. Copy and paste from the [Your Faith Community Name Goes Here] tag to the [End of 941 Statement] tag.

Statement of Explanation for House of Worship Employee Retention Credit

[Your Faith Community Name Goes Here] qualifies for employee retention credits for the last three quarters of 2020 and the first two quarters of 2021 based on government orders from Washington state governor Jay Inslee that either fully or partially suspended operations from March 23, 2020 through June 30, 2021.

PERIOD OF FULL SUSPENSION

From March 23, 2020 through January 11, 2021, the faith community qualifies for employee retention credits due to the “full suspension of activities due to a government order” rules of section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the related guidance in IRS Notice 2021-20, IRS Notice 2021-23 and IRS Notice 2021-49.

The government order that starts the period of full suspension is the “Stay Home, Stay Healthy” Proclamation 20-25 (March 23, 2020), and subsequent extensions and amendments were issued under RCW 43.06.220(1).

Quoting from page 4 of that proclamation,

“All people in Washington State shall immediately cease participating in all public and private gatherings and multi-person activities for social, spiritual and recreational purposes, regardless of the number of people involved, except as specifically identified herein. Such activity includes, but is not limited to, community, civic, public, leisure, faith-based, or sporting events; parades; concerts; festivals; conventions; fundraisers; and similar activities. This prohibition also applies to planned wedding and funeral events. This prohibition shall remain in effect until midnight on April 6, 2020, unless extended beyond that date.”

Note: Links to all of Governor Inslee’s COVID-19 proclamations which repeatedly extended the shutdown the operations of faith communities, appear here:

https://mrsc.org/explore-topics/public-safety/emergency-services/public-health-emergencies/coronavirus-state-proclamations-and-guidance

The government order that ends the period of full suspension is the “PROCLAMATION BY THE GOVERNOR AMENDING PROCLAMATIONS 20-05 and 20-25, et seq. 20-25.12 “HEALTHY WASHINGTON – ROADMAP TO RECOVERY” issued on January 11, 2021.

PERIOD OF PARTIAL SUSPENSION

From January 11, 2021 through June 30, 2021, the faith community qualifies for employee retention credits due to the “partial suspension of activities due to a government order” rules of section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. No. 116-136, 134 Stat. 281 (March 27, 2020), as amended by section 206 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), enacted as Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260, 134 Stat. 1182 (December 27, 2020) and again the related guidance in IRS Notice 2021-20, IRS Notice 2021-23 and IRS Notice 2021-49.

The government order that starts the period of partial suspension is the previously referenced “PROCLAMATION BY THE GOVERNOR AMENDING PROCLAMATIONS 20-05 and 20-25, et seq. 20-25.12 “Healthy Washington – Roadmap to Recovery” issued on January 11, 2021. That proclamation specifically expands the state’s COVID-19 orders to include the “Healthy Washington – Roadmap to Recovery” document and plan. That document and plan creates three phases of operation for faith communities: Phase 1, phase 2 and phase 3. During phase 1 and phase 2, which run from January 11, 2021 through May 18, 2021, faith communities can operate their indoor worship services, their principal operation, but only at 25 percent or less capacity. Phase 1 and 2 therefore represent a 75 percent reduction in capacity based on hours of service and therefore a more than a nominal reduction in hours of service. During phase 3, which runs from May 18, 2021 through June 30, 2021, faith communities can operate indoor worship services but only at 50 percent or less capacity. Phase 3 therefore represents a 50 percent reduction capacity and therefore again a more than a nominal reduction in hours of service.

The government order that ends the period of partial suspension is PROCLAMATION BY THE GOVERNOR AMENDING PROCLAMATIONS 20-05 and 20-25, et seq. 20-25.13 “HEALTHY WASHINGTON – ROADMAP TO RECOVERY” issued on May 21, 2021.

Quoting from that order,

“WHEREAS, the data supported moving all counties to Phase 3 on May 18, 2021, and, further, unless the data changes and supports a different path, setting a goal of fully reopening most sectors in the state by June 30, 2021…”

Proclamation 20-25.12 is available here: https://governor.wa.gov/sites/default/files/proclamations/proc_20-25.13.pdf

The Healthy Washington—Roadmap to Recovery document is available here: https://governor.wa.gov/sites/default/files/2023-01/HealthyWashington.pdf

[END OF 941 STATEMENT]

Does Your Church, Mosque, Temple or Synagogue Need Help?

If you’re a Washington state employer and you can’t do the amended returns yourself? Or you can’t get a CPA in your congregation to do the work? We’re happy to help your organization amend the returns. We won’t do the work for free. But the price will be very affordable. Turnaround time is usually a few days. We’ll let you pay when you get your refunds.

You can contact us here: Nelson CPA.

Other Resources

Here’s a longer discussion of how houses of worship handle employee retention credits: Houses of Worship Miss Boat on Employee Retention Credits

Just saying that every house of worship in Washington state qualifies sounds pretty, er, aggressive. Therefore, just so you know we aren’t cavalier about employee retention credits? Here’s a discussion of how too many employers are getting scammed or conned by employee retention credit consultants: If You Got Conned in an ERC Scam.

Also just in case you’re a decision maker in a for-profit business that possibly could qualify? Check out this article which explains the general rules: 16 Ways to Qualify for Employee Retention Credits.

The post Washington State Houses of Worship All Qualify for Employee Retention Credits appeared first on Evergreen Small Business.

But the rules? Complicated from the beginning. And fluid. Lots of changes in how the credits work.

In this blog post, therefore, I want to identify the three basic ways in which professionals who own their own practice can qualify for and claim these credits. I’m mostly going to use healthcare professionals in the examples that follow. But the tactics and tricks described work for any self-employed professional or small business owner. Law firm partnerships. CPA firms. Consultants. You get the idea.

Three Notes to Start

Three quick notes to start: First, these tax credit refunds connect to non-owner and non-owner-family employee wages paid in the last three quarters of 2020 and then usually for the first three quarters of 2021. Some employers also get tax credit refunds for the fourth quarter of 2021.

Second, the credit formula gives a per-employee refund equal to as much as 50 percent of the first $10,000 in wages paid in 2020 and as much as 70 percent of the first $10,000 in wages paid in a quarter in 2021.

A third point: This blog post talks about how the rules work for small employers. Small means 100 or fewer employees in 2020 and 500 or fewer employees in 2021. Different rules apply to large employers.

And now let’s talk about the ways you or the professional services firm you own may qualify.

Quarterly Revenues Sagged

The standard and most straightforward way to qualify for the credits? Compared to 2019 revenues, your firm’s revenue sagged some quarter by more than fifty percent in 2020 or by more than 20 percent in 2021.

Suffer the specified quarterly decline, and you usually get tax credit refunds.

Example: A group medical practice saw quarterly revenues drop from its typical $1,000,000 a quarter to $750,000 a quarter in 2021. That 25 percent drop qualifies the practice for employee retention tax credits. If the practice employs ten workers who each make $20,000 a quarter, credits equal 70 percent of the first $10,000 in wages paid each of the ten workers. That probably means a $70,000 tax credit for the first three quarters of 2021. So, $210,000 in total.

By the way? If you should have gotten credits but didn’t, that oversight may connect to your Paycheck Protection Program loan. Initially, the rules said you could not get employee retention tax credits if you borrowed and then received forgiveness for a PPP loan.

The rules later changed, however, and said only that you could not get tax credit refunds for wages paid with PPP funds.

Government Orders Suspend All or Portion of Operation

Probably the easiest way to qualify for most employers? Getting hit by a government order that shut down either the entire operation or some part of it.

Specifically, if a state or local government order suspended more than a nominal part of your operation? You qualify.

And two quick clarifications: First, the “more than nominal” standard means at least a ten percent drop in your revenues or in the hours people work.

Second, a government order that impacts your own operation qualifies your firm. But so does a government order that impacts a vendor or supplier you rely on.

An example illustrates how this works even for an essential professional service.

Example: A orthopedic surgery practice finds itself subjected to a state order which prohibits elective surgery from May 15, 2020 through August 15, 2020. That order triggers a ten percent reduction in revenues while it’s in effect. This surgical practice therefore qualifies for tax credits on wages paid during the last half of the second quarter and the first half of the third quarter. If the practice employs ten workers who each make $20,000 a quarter, probably credits equal 70 percent of $10,000 in wages paid each of the ten workers in both quarters. So, a $70,000 tax credit for the second quarter and again for the third quarter.  Or $140,000 in total.

And another example to show how easily government orders trigger eligibility.

Example: A law firm found itself impacted more than nominally by a county health order that closed courtrooms during the last two quarters of 2020. The firm qualifies for employee retention tax credits for both quarters. If the firm employed five employees who each made at least $10,000 during that government order? The employee retention tax credits should equal 50 percent of the first $10,000 in wages paid each employee, or $5,000 per employee. In total, that means $25,000 of tax credits for 2020.

Your Business Operation Bigger than You Think

A subtle thing to note about all this: Tax law combines the businesses a taxpayer owns using the same principles as apply to pensions. This aggregation can produce surprising results, as another example shows.

Example: A physician’s professional practice employs 15 high wage employees. He also owns a winery that employs three modest wage employees. A government order shuts down the winery. Because the winery represents more than ten percent of the physician’s businesses’ operation in terms of hours worked, however, he can claim the $7,000 per employee per quarter credit on all 18 employees—or $126,000 per quarter.

New Business or Rental Investment

Some small business owners enjoy a third way to qualify for employee retention tax credits in the third and fourth quarter of 2021.

If the employer averages $1,000,000 or less of revenue for the three years prior to 2021, starting a new trade or business sometime after February 15, 2020 and before 2021 ends qualifies the business owner for tax credit refunds.

Note: You need to start the new business before the quarter ends to get the credit for the quarter.

But this special version of the employee retention tax credit—called the recovery startup business employee retention credit—provides a credit of up to $50,000 a quarter.

A final example illustrates how this credit works.

Example: A dentist operates a small dental practice with $1,000,000 of average annual revenues. She also bought a rental property in late 2020. That rental property probably counts as a new trade or business and means she gets to take the employee retention tax credit for the third and fourth quarter of 2021 on her dental practice wages. If the practice employs five workers who each make $20,000 a quarter, probably credits equal 70 percent of first $10,000 in wages paid each employee. So, a $35,000 tax credit for each quarter or $70,000 in total.

If You Missed Employee Retention Tax Credit Refunds?

If you missed refunds you’re entitled to? Or maybe you did? Not a problem. Only a minor headache.

Confer with your tax accountant. See if she or he can help. Probably they can. (You need to amend your payroll tax and income tax returns to get the credits.)

And if they can’t help, consider talking with other tax accountants who have developed specialty practices in this area. Many CPA firms, including ours, did learn the ins and outs of the law. (We’d be delighted to help you. Contact us here.)

The one awkward warning I’ll share: My opinion is you should avoid the self-proclaimed employee retention credit consultants.

At least one of the larger firms providing this service appears to be subject to an FBI and Department of Justice investigation due to other tax credit and deduction work they’ve done. That’s scary.

And other firms whose work product we’ve learned about in various ways have often been extremely, extremely, extremely aggressive about the tax positions they take on the refund claims. I personally believe many of these refund claims won’t withstand scrutiny by the Internal Revenue Service.

Other Resources

This recent blog post at our CPA firm website provides a fuller description of the precise ways employers qualify for employee retention tax credits: 16 Ways of Qualifying for Employee Retention Credits.

If you want or need a lot more detailed information? Grab our paperback book: Maximizing Employee Retenion Credits.

And for readers who really want to dig into the details, three IRS notices provide most of the guidance one wants to know: IRS Notice 2021-20, IRS Notice 2021-23 and IRS Notice 2021-49.

The post Employee Retention Tax Credits Still Windfall for Professional Service Firm Owners appeared first on Evergreen Small Business.

But those programs have now ended. While the WOTC is still around.  Accordingly, small business owners should be aware of it.  So, let’s run through what the WOTC is and how it works.

Work Opportunity Tax Credit Background

The WOTC is a tax benefit to encourage employers to hire targeted groups that face barriers to employment.  Once set to expire after 2019, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended the WOTC through 2025.

In general, the WOTC is equal to 40% of up to $6,000 of wages paid to an individual who is in their first year of employment, performs at least 400 hours of services, and falls into one of these ten qualifying groups:

• Temporary Assistance for Needy Families (TANF) recipients,
• Unemployed veterans, including disabled veterans,
• Formerly incarcerated individuals,
• Designated community residents living in Empowerment Zones or Rural Renewal Counties,
• Vocational rehabilitation referrals,
• Summer youth employees living in Empowerment Zones
• Supplemental Nutrition Assistance Program (SNAP) recipients,
• Supplemental Security Income (SSI) recipients,
• Long-term family assistance recipients and
• Long-term unemployment recipients.

The last group is interesting since so many people have been out of work due to the Covid pandemic.  A long-term unemployment recipient is someone out of work for 27 consecutive weeks who collected unemployment benefits at least part of the time.  Many people rejoining the workface are probably in this group.

Qualified Wages  

Wages subject to Social Security and Medicare taxes are qualified wages for the WOTC.  But qualified wages can be zero if:

• The employee worked less than 120 hours,
• The wages were used for another employment credit (ERC, Qualified Sick and Family Leave, etc.)
• The employee worked for you previously (be careful if you furloughed employees during the pandemic and rehired them),
• The employee is your dependent,
• The person is a replacement employee during a strike or lockout,

Now let’s discuss the mechanics of how to claim the credit.

State Paperwork

The first step to claiming the credit is filling out Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit.  You have 28 days from the hire date to file this with your state.  The form asks the employee if they fit into one of the ten groups mentioned above, along with their name, address, and social security number. Consider making this form part of your standard onboarding process so you don’t forget about the work opportunity credit!

If the employee fits into one of the qualifying categories, the next step is to complete ETA 9061, Individual Characteristics Form.  It is similar to Form 8850 with a bit more detail.

When both forms are completed they are sent to the state.  We send the forms to the Employment Security Department in Washington State, for example.

The state then makes a determination if that employee qualifies.  A couple points on that…

First, the state may require additional documentation.  To qualify a veteran in Washington you need to submit the applicant’s DD214 or a letter from the Department of Defense or National Personnel Records that show active duty start and ends dates.  For a disabled veteran in Washington you must also submit a Veterans Administration Disability Letter.

Second (at least in Washington), you can file an appeal if your claim is denied.  Probably you will need to supply additional supporting documentation.  You may need to include a copy of the applicant’s SNAP benefits letter, for example.

Claiming the Work Opportunity Tax Credit

Assuming the state approves your applicant, the credit is claimed when you file your annual income tax return on Form 5884, Work Opportunity Credit.  Corporations claim the credit at the entity level and pass-through entities claim the credit at the individual level.

The credit is non-refundable, meaning you cannot claim it in a year without sufficient tax liability.  However, the IRS lets you carry any unused credits forward for 20 years.  Chances are, you will get to utilize it at some point if you find yourself unable to claim it in year one.

Higher Limits for Veteran Employees

Earlier I mentioned the credit is generally equal to 40% of up to $6,000 of qualified wages per employee, or $2,400.  Certain qualified veterans have considerably higher limits as follows:

• $12,000 of wages ($4,800 credit) if the veteran is entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released for active duty
• $14,000 of wages ($5,600 credit) if the veteran is unemployed for a period(s) totaling at least 6 months in the 1-year period ending on the hiring date
• $24,000 of wages ($9,600 credit) if the veteran is entitled to compensation for a service-connected disability and has been unemployed for a period(s) totaling at least 6 months  in the 1-year period ending on the hiring date.

Final Thoughts

The WOTC has been easy to forget about lately.  It was going to end in 2019.  Then the PPP and ERC programs overshadowed it.

Those bigger programs ended in 2021, but the WOTC is still soldiering on.  It might not be as sexy, but saving $2,400 or $4,800 per year is nothing to sneeze at.

This fairly straight forward credit should not be forgotten.  So I will say it one more time: Don’t forget about the Work Opportunity Tax Credit!

The post Don’t Forget About The Work Opportunity Tax Credit! appeared first on Evergreen Small Business.

The reason? These employee retention credits add up fast. Pretty easily as much $5,000 per employee for 2020. If everything clicks just right, as much as $28,000 per employee for 2021.

In fact, crunch the numbers and complete the paperwork? For even small employers, we’re making refund claims that average $50,000 to $150,000. Which can be a gamechanger if your small business got beat up by the pandemic.

A Handful of Notes Before We Start

This post won’t describe how the credit formula calculations work.

We’ve discussed that bit of the puzzle in earlier blog posts in detail over the last couple of years. We’ve also got that book that appears next to this paragraph.

Accordingly, in this blog post, we focus on identifying when you want to go to the work of grinding through the formulas and their calculations.

I’m going to assume you qualify as a small employer. A small employer employed 100 or fewer full-time employees in 2020 and 500 or fewer full-time employees in 2021. That assumption simplifies the following discussion.

Finally, we’ll return next week to our regular Tax Strategy Tuesday series.

And now let’s get started…

More Than Fifty Percent Decline in Quarterly Gross Receipts in 2020

If your firm’s or organization’s gross receipts declined by more than fifty percent in some quarter of 2020? Yes. You qualify.

Furthermore, once an employer qualifies for credits based on a more than fifty percent decline, its eligibility continues through the quarter that 2020 gross receipts rise to more than 80 percent of 2019 gross receipts.

Example: Say your firm suffered a decline in gross receipts for the second quarter of 2020. Gross receipts which usually run a $100,000 a quarter dropped to $49,000. Fortunately, the next quarter, gross receipts bounced back to the usual $100,000 a quarter. In this situation, your firm qualifies for employee retention credits for the second quarter and then again for the subsequent third quarter.

One other example, too…

Example: Say that through 2019 your firm enjoyed steady quarterly gross receipts of $100,000. But then in the first quarter of 2020, gross receipts dropped to $49,000. That gives you eligibility for the first quarter. If gross receipts then ran $80,000 for the second quarter and the third quarter of 2020 and but then improved to $150,000 for the fourth quarter? You potentially qualify for employee retention credits on wages paid in all four quarters of 2020.

A few things to keep in mind… First, for 2020 employee retention credits, you can’t get more than $5,000 for an employee for the year. Second, you get the credit only for wages you paid out of company funds. Not for wages paid using paycheck protection program loans. And not for wages paid using other tax credits. Third, finally, while you can get employee retention credits for a fifty percent decline in the first quarter’s receipts, only wages paid after March 12, 2020 plug into the credit formula.

More than Twenty Percent Decline in Gross Receipts for Quarter 4 of 2020

If your firm’s or organization’s gross receipts in quarter 4 of 2020 declined by more than twenty percent as compared to quarter 4 of 2019? You qualify for employee retention credits for quarter 1 of 2021.

Note that in 2021, employee retention credits equal as much as $7,000 an employee for each quarter.

Example: In 2019, your firm generated $1,000,000 in gross receipts in the fourth quarter. In 2020, your firm generated $795,000 of gross receipts in the fourth quarter. That “more than twenty percent” decline qualifies your firm for employee retention credits for the first quarter of 2021.

More than Twenty Percent Decline in Gross Receipts for Quarter 1, 2 or 3 of 2021

If your firm’s or organization’s gross receipts in the first, second or third quarter of 2021 declined by more than twenty percent, you qualify for employee retention credits for either one or two quarters. You’ll qualify for the quarter with the decline. And if the quarter is the first or second quarter, you’ll also qualify for the subsequent quarter.

Example: For the first quarter of 2019, your gross receipts equaled $100,000. Due to Covid-19, for the first quarter of 2021, your gross receipts equaled $79,500. That 20.5 percent decline qualifies your firm for employee retention credits for the first quarter—and for the second quarter.

Let me give you another example, too, to highlight how a decline in the previous quarter creates eligibility.

Example: Say that a firm enjoyed steady quarterly gross receipts of $100,000 through 2019 and the first three quarters of 2020. And then say for the fourth quarter, it saw quarterly gross receipts decline to $79,500. Gross receipts then recovered to $100,000 for the first quarter of 2021. But then again dropped back to $79,500 for the second quarter of 2021. In this case, the firm qualifies for employee retention credits for all three quarters of 2021. It qualifies in quarter 1 of 2021 because the previous quarter’s gross receipts declined by more than 20 percent. It qualifies in quarter 2 of 2021 because gross receipts for that specific quarter declined by more than 20 percent. Finally, it qualifies for quarter 3 of 2021 because the previous quarter’s gross receipts—so quarter 2–declined by more than 20 percent.

Use a “Wrong” Quarter for 2020 Credits if Your Business Started in 2019

Qualifying for employee retention credits based on a decline in gross receipts usually compares quarterly gross receipts in 2019 to those same quarters in 2020 and 2021.

To determine whether the Covid-19 pandemic pushed down gross receipts in the second quarter of 2020 or 2021, for example, the formulas look back at the second quarter gross receipts of 2019.

That begs a question, though. What if a business starts part-way through 2019 and therefore a business owner doesn’t have a quarter from 2019 to use for comparison? Congress and the IRS provide a work-around.

First, they say for 2020 employee retention credits you use the first, probably partial quarter the firm operated in 2019 for the comparison.

Example: You started a new business in the third quarter of 2019. Accordingly, no first quarter or second quarter gross receipts value exists for comparisons between 2019 and 2020. To determine if quarterly gross receipts for the first or second quarter of 2020 declined by more than 50 percent, however, you can compare those quarters’ gross receipts to the 2019 third quarter gross receipts value.

The IRS also tells employers to use a reasonable method for converting a partial quarter’s gross receipts to a full quarter’s gross receipts.

Example: If an employer started a business halfway through the third quarter of 2019 and generates $100,000 of gross receipts for that half quarter? Probably a reasonable way to estimate a full quarter’s gross receipts is to double the $100,000.

Use 2020 Quarter if Not Operating in 2019 for 2021 Credits

And then things work slightly different for 2021 credits.

If an employer didn’t operate in some quarter in 2019 and so can’t compare 2021 quarterly receipts to 2019 quarterly receipts, it can compare the equivalent 2020 quarter to the 2021 quarter.

You Acquired a Hard-hit Business

An employer needs to aggregate the gross receipts of all the businesses it owns for purposes of determining whether gross receipts declined.

If you acquired a business in 2020 or 2021, furthermore, you must aggregate gross receipts starting from the point you acquire the new business.

But then this wrinkle: You can choose to aggregate the acquired business’s gross receipts from before the acquisition.

This option to aggregate pre-acquisition gross receipts may create a really interesting opportunity for some entrepreneurs. The following example illustrates this.

Example: You operate a food services firm that generated $1,000,000 a quarter of revenues in 2019, 2020 and 2021. On July 1, 2020, you bought a struggling restaurant. Through-out 2019, that restaurant generated $2,000,000 a quarter. Unfortunately, the restaurant’s gross receipts dropped 90 percent to $200,000 a quarter in mid-2020. The aggregated quarterly gross receipts of the employer after the acquisition therefore equal $1,200,000. Those numbers reflect a 60 percent decline. Accordingly, your acquisition qualifies your firm for employee retention credits for the last two quarters of 2020 and the first three quarters of 2021.

Note: A firm of the size imagined in the preceding example might have as many as forty or fifty employees. That would mean potentially a $200,000 or $250,000 employee retention credit for 2020. And as much as $280,000 to $350,000 a quarter for each of the first three quarters of 2021.

Government Order Fully Closes Your Business

If a federal, state or municipal government order fully closed your business due to Covid-19, wages you paid employees during the closure probably count for employee retention credits for 2020 and for the first three quarters of 2021.

Example: A government order banned patrons from visiting your firm from April 15, 2020 through November 15, 2020. Wages paid for the last half of the second quarter, all the wages paid during the third quarter, and wages paid for the first half of the fourth quarter potentially count for employee retention credit purposes.

Government Order Partially Closed Your Business

If a federal, state or municipal government order partially closed your business due to Covid-19, and that partial closure was more than just nominal, wages you paid during the partial closure probably count for employee retention credits in 2020 and for the first three quarters of 2021.

The IRS defines nominal, by the way, as ten percent or greater. Further, the IRS rule looks at either hours of service or gross receipts. So if a government order closed a part of the business that represents either ten percent or more of the hours worked… or closed a part of the business that represents ten percent or more of the gross receipts? Yeah, that counts as a partial closure.

As with a full closure, only wages paid during the partial closure count.

Example: A restaurant owner’s facilities include an inside dining room, a cocktail lounge, and outside patio area. Government orders close the inside dining room and cocktail lounge. These orders allow the outside patio area to continue operations. Further, the restaurant attempts to ramp-up a “take-out” service which government orders also allow. As long as the suspended parts of the business—the inside dining room and cocktail lounge–represent at least ten percent of the hours of service or at least ten percent of the gross receipts, all the restaurant’s wages probably count for employee retention credit purposes.

Government Order Closed Your Supplier

A government order that fully or partially suspends not your firm but a supplier you rely on can qualify you for employee retention credits, too.

The trick here? That government order that hits your supplier must trigger you either fully or partially suspending your operations.

Example: Your firm, a restaurant, isn’t subject to government orders which fully or partially suspend your operations. However, due to Covid-19 infections, local authorities close for May and June of 2020 the meatpacking plant you rely on for many of your supplies. That closure order, if it causes a full or partial closure of your restaurant, qualifies your firm for employee retention credits for May and June of 2020.

Government Order Reduces Hours of Operation

If a government order reduces the hours of operation from ten hours a day to eight hours a day, that twenty-five percent reduction in hours of service counts as a partial suspension. And the employer probably qualifies for employee retention credits during the interval when the reduced hours are mandated.

Government Orders Required Employees to Work Remotely

If a government order closes down a firm’s physical office location, and employees can successfully telework, that doesn’t count as a full or partial suspension.

However, if employees can’t really successfully telework, the closing of the physical office location counts as a partial suspension. (The key factor is whether the new remote-work approach works comparably to the old in-person approach.)

Further, if a transition to a remote work approach takes two-weeks or longer of transition time, the IRS says that creates a partial suspension.

Government Order Requires Social Distancing or Similar Modifications

If a government order requires social distancing or other modifications to a firm’s operations and those modifications have more than a nominal effect on a firm’s operation, that probably counts as a partial suspension.

Example: A government order requires restaurants to operate at fifty-percent capacity so as to allow social distancing. That modification order probably produces at least a ten percent reduction in hours of service or gross receipts and so counts as a more than nominal partial suspension.

Note: The IRS Notice that describes when modifications required by government orders possibly lead to partial suspensions (IRS Note 2021-20) identifies the sorts of changes that potentially qualify an employer as partially suspended: “limiting occupancy to provide for social distancing, requiring services to be performed only on an appointment basis (for businesses that previously offered walk-in service), changing the format of service (for example, restrictions on buffet or self-serve, but not prepackaged or carry-out), or requiring employees and customers to wear face coverings.”

Employer Expands a State or Local Order

If a firm operates in more than one location, it can decide to apply a government closure order that technically applies to only one location to all its locations. And if the effect of the closure order is more than nominal once the employer expands the government order to create a nationwide or firmwide policy? Yeah, that can count as a partial suspension.

Note: The IRS Notice that provides this guidance, IRS Notice 2020-21, comments that the expansion of the local government order should mesh with CDC recommendations and Department of Homeland Security guidelines.

Government Order Fully or Partially Closed One of Businesses You Operate

The employee retention credit formulas treat all the trades or businesses someone owns as a single employer. That means if someone owns, say, a winery, a software company, and rental property, these three trades or businesses get aggregated into a single employer

If a government order closes one of the trades or businesses—say the winery—and that partial closure counts as more than just nominal, wages paid by the employer in all three of the trades or businesses it operates probably count for employee retention credits.

Again, the IRS defines nominal as a ten percent or greater reduction in either hours of service or gross receipts. But for entrepreneurs operating multiple trades or businesses, therefore, a closure of any one of the ventures they operate possibly gives them employee retention credits on all their trades or businesses.

Another reminder. As with a full closure, only wages paid during the partial closure count.

Example: A business owner owns a winery (three employees), a consulting firm (15 employees), and an apartment building (one employee). Government orders close the winery for April, May, June, and July of 2020. That should count as a partial, more than nominal closure. Therefore, the employer probably qualifies for employee retention credits on wages paid in April, May, June and July of 2020 for the winery, the consulting firm, and the apartment building.

You Started a New Trade or Business After February 15, 2020

For the third and fourth quarter of 2021, an employer qualifies for a special flavor of employee retention credits—called recovery startup business employee retention credits—if it began carrying on any trade or business after February 15, 2020 and before 2021 ends.

To get recovery startup business credits for the third quarter of 2021, the employer needs to begin carrying on the trade or business before September 30, 2021. To get the credits for the fourth quarter of 2021, the employer needs to begin carrying on a trade or business before December 31, 2021.

Tax law limits a recovery startup business employee retention credit to not more than $50,000 in a quarter. And only small employers (averaging $1,000,000 or less in gross receipts for the three years prior to 2021) qualify. Furthermore, if in the third quarter of 2021, an employer qualifies for non-recovery-startup-business credits? So those based on a substantial decline in gross receipts or a full or partial suspension of operations? It should use those larger credits.

But if an individual who can’t otherwise qualify for employee retention credits starts a new trade or business? That act of starting a new business probably qualifies the employer for employee retention credits. And once again note that in this case the employer gets credits on the wages paid by all of the trades or businesses the employer aggregates.

Example: A small construction company averages less than $1,000,000 in annual gross receipts. The owner starts working as a rideshare driver on weekends to supplement his family’s income. That new sideline rideshare-driver business probably qualifies the business owner for employee retention credits on the wages paid by his construction company.

You Bought a Rental Property After February 15, 2020

One final way to qualify. Which is really a variant of the recovery startup business qualification method just described.

If a business owner bought a rental property after February 15, 2020 in pursuit of profits? And if she or he shows continuity and regularity in the rental trade or business? Bingo. That rental trade or business probably qualifies the employer for recovery startup business employee retention credits. (The aggregated gross receipts of the employer need to average $1,000,000 or less for 2018, 2019 and 2020.)

Example: The owner of a small professional services firm averaged less than $1,000,000 in revenues from 2018 through 2020. During the summer of 2020, he started a short-term rental trade or business. That qualifies the business owner for up to $50,000 of employee retention credits for wages paid in the professional services firm in the third and fourth quarter of 2021.

We published a longer blog here that explains all the details of using a rental property to qualify for employee retention credits: The $100,000 Real Estate Employee Retention Credit Windfall

Other Resources You Might Find Useful

Tax accountants probably want to read or maybe reread the employee retention credit IRS notices. They provide the rules discussed in this blog post related to qualifying for employee retention credits: IRS Notice 2021-20, IRS Notice 2021-23 and IRS Notice 2021-49.

If someone is helping clients with recovery startup business credits? This blog post may be a useful: Nine Awkward Questions about the Recovery Startup Business Employee Retention Credit

Nonprofit organizations may find this blog post helpful: Houses of Worship and Nonprofits Miss Boat on Employee Retention Credits

Finally, if you need help with employee retention credits, first talk with your tax accountant. Do keep in mind tax season gets pretty busy for accountants. And if you can’t get the help you need from her or him? Sure, you can contact our CPA firm. Please use this form, Nelson CPA.

The post 16 Ways of Qualifying for Employee Retention Credits appeared first on Evergreen Small Business.

That tax strategy—and yes you still have time barely—gives you a tax credit that equals as much as $50,000 for the fourth quarter of 2021.

And just to make this point crystal clear. Yes. The federal government may give you $50,000. Cash. All you need to do? Start a trade or business before the year ends.

Tip: We discuss a tax strategies every Tuesday here at the Evergreen Small Business blog. Click here to see the full list: Tax Strategy Tuesday.

Employee Startup Business Employee Retention Credit in Nutshell

The rules for the recovery startup business employee retention credit work simply.

A small business employer needs to begin carrying a trade or business sometime after February 15, 2020 and before December 31, 2021.

The recovery startup business employee retention credit equals 70 percent of the wages and health insurance paid to any non-family-member employee but not more than $7,000 per employee for a quarter.

And then the rules limit you to $50,000 a quarter.

Example: You own a construction company and then start a sideline consulting gig during the quarter. The construction company employs five workers who each make $12,000 a quarter. The consulting gig employs a part-time employee who makes $5,000 a quarter. Assuming none of these employees is family? The recovery startup business employee retention credit equals $38,500: 70 percent of the first $10,000 paid to each of the five construction company employees plus 70 percent of the $5,000 paid to the consulting business’s part-time worker.

The Two Tricks that Make Tax Strategy Work

Two tricks make the recovery startup business employee retention credit super-attractive as a tax strategy.

First? All you need to do is begin carrying on a trade or business. (If you’re already in one business, that means beginning to carry on a new or a different trade or business.)

This caution: A trade or business needs to something you do in pursuit of profits. So, a real business. Not a hobby. Not a faux business. And you need to engage in the trade or business with regularity and continuity. (We’ve pointed out elsewhere that buying a rental property and placing that property into service qualifies under the rules.)

And then the second trick that makes this tax strategy really attractive: An employer aggregates all its trades or businesses. An entrepreneur who owns and operates a construction company and a rental property, for example, aggregates those two ventures into a single employer. Which produces a really interesting result…

Example: A construction company owned by a single entrepreneur employs workers. She buys a rental property after February 15, 2020 and that rental property qualifies as a trade or business. That new rental then counts as beginning to carry on a trade or business. And then the wages paid by the construction company create up to $50,000 of employee retention credits.

Possible Tax Savings from Startup Business Credit Tax Strategy

Because the tax strategy we’re talking about here is a credit, the tax savings equal the credit.

A $25,000 credit means you get $25,000 of tax savings. A $50,000 credit means you get $50,000 of savings.

To claim the employee retention credit, an employer uses the quarterly 941 federal payroll tax return. Essentially, you (or your accountant) uses the employee retention credit to reduce the payroll tax deposits required. Or if you’ve already made the payroll tax deposits, you use the employee retention credit to get a refund of overpaid deposits.

Turbocharging the Startup Business Employee Retention Credit Strategy

Just to point again to something mentioned earlier. You can claim a recovery startup business credit if you started a new trade or business after February 15, 2020 and before December 31, 2021.

Someone who starts a business after February 15 2020 and before September 30, 2021 gets the credit for the third and fourth quarters of 2021. Someone who starts a business during the fourth quarter of 2021, gets the credit only for the fourth quarter.

Accordingly, you want to think about whether or not you’ve already started a trade or business and so already triggered eligibility.

Example: In the summer of 2020, you bought a rental property. If you’re attempting to maximize profits and engaging in that rental trade or business with regularity and continuity? Bingo. You already qualify. You should have added an employee retention credit to your third quarter 941 filed in 2021. And then you should add an employee retention credit to your fourth quarter 941 you’ll file in early 2022.

If you haven’t yet started a new trade or business, you need to find something else—something real of course—to start as soon as you can.

Limits to Strategy

Only small business employers qualify for recovery startup business employee retention credits.

The definition of “small business?” An employer that averages $1,000,000 or less in gross receipts over the three previous tax years. Usually that means the 2018, 2019 and 2020 calendar years. Note that some special rules apply if an employer didn’t operate in those years.

Also the strategy only works for two quarters: The third quarter of 2021 and the fourth quarter of 2021.

Note: The other flavors of the employee retention credit terminated at the end of the third quarter of 2021. Only the recovery startup business employee retention credit program works in the fourth quarter 2021.

Also this important bit: For any employee retention credit, only wages and health insurance paid to non-family-members count.

How This Tax Strategy Can Blow Up

Taxpayers and their advisors want to carefully assess whether some new activity rises to the level of a separate trade or business.

We’ve got a discussion that digs into this issue in our book, Maximizing Employee Retention Credits, but the general rules say you apply the Section 162, need to have separate or separable books and financial records, and want to have begun carrying that identifiable new activity by December 31, 2021.

The Startup Business Credit Strategy Works Best for These Taxpayers

The startup business employee retention credit works best, in a sense, for qualifying small business owners who start a new trade or business or invest in rental  property but who already have employees in another existing business.

Other Information Sources

Section 3134 is the bit of law that creates the recovery startup busines employee retention credit (available here.) That statute provides useful detail. Further, the IRS published Notice 2021-49 and it gives detailed guidance on the recovery startup business employee retention credit (available here.)

For taxpayers and tax advisors who want to dig into the details of the recovery startup business credit, we’ve got a series of longer blog posts: Recovery Startup Business Employee Retention Credit, the $100,000 Real Estate Employee Retention Credit Windfall, and Nine Awkward Questions about the Startup Business Employee Retention Credit.

Finally, and as always, taxpayers want to discuss a strategy like this with their tax advisor. He or she knows the details of your specific situation. And this plug for our CPA firm: If you don’t have a tax advisor who can help, please consider contacting us: Nelson CPA.

The post Tax Strategy Tuesday:  Startup Business Employee Retention Credit appeared first on Evergreen Small Business.

And then why I bring this up, even though tax season only ended a couple of weeks ago? That checklist? It probably belongs in the organizers we tax accountants send our business clients in just a few weeks.

So, in an effort to help tax accountants and small businesses everywhere? I present the employee retention credit checklist shown below.

Note that the checklist items appear in the headings. Those go on your organizer.

The text under the headings? Those explain why you and I want to ask the questions. And how we process client answers.

Did your firm suffer  a 50% decline in 2020 or a 20% decline in 2021 in quarterly gross receipts?

A first task? Because many people thought (correctly at the time) that they could not receive both Paycheck Protection Program loans and take employee retention credits? Lots of people missed getting employee retention credits. Even though they qualified.

Accordingly, we need to check to see if folks qualified for employee retention credits. And the easiest way to qualify? Due to a substantial decline in quarterly gross receipts as compared to (usually) 2019.

Specifically, we should double-check if an employer suffered either more than a 50% decline in 2020 as compared to 2019 or more than a 20% decline in 2021 as compared to 2019.

If an employer did get that beat up? Bingo. They probably qualify for employee retention credits. If some employer does qualify, you probably want to extend the 2021 tax return. And then file employee retention credit refund claims as soon as you can. Then, after that work is done, return to the 2021 income tax return.

Two reasons for this suggestion. First, as you already know, those credits can add up to big numbers. Up to $5,000 per employee for 2020. And up to $7,000 per employee for each quarter in 2021. (But clients don’t always know that. So we ought to double-check.)

And then, a second reason for this suggestion: If you should file employee retention credit refund claims? You need to finish  that work in order to know what deductions you take for wages on the tax return. A taxpayer needs to reduce its wages deductions for employee recention credits.

The upshot of all this? If a client is eligible for employee retention credits, first get the 2020 941 payroll returns amended. As soon as possible. Start the long slow wait for the refunds. And then pivot to the income tax returns.

Did COVID-19-related state or local government orders close your business or part of your business?

A related point? Verify an employer didn’t have its operations either fully or partially suspended by state or local government orders related to the COVID-19 pandemic.

This is the harder way to gain eligibility. But if such a suspension did occur? Check to see whether the employer qualifies for an employee retention credit on that basis.

A full suspension in operations should qualify an employer for employee retention credits for the duration of the suspension.

A partial suspension in operations qualifies an employer for credits if the part of the operation suspended amounts to more than a nominal chunk of the business. Nominal in this context means ten percent or more of gross receipts or ten percent or more of hours of service.

Note: We’ve got a longer discussion about how suspension triggers employee retention credit eligibility here: Solving the Employee Retention Credit Partial Suspension Puzzle.

Again, however, if you or I do find ourselves with clients who deserve but didn’t get employee retention credits? Probably we immediately extend all the affected tax returns. Then do the employee retention credit refund claim. Probably after tax season ends? And then, after that, finish the 2021 tax returns. And maybe amend the 2020 tax returns.

Did you start another trade or business sometime after February 15, 2020?

Many small business employers who began the “carrying on” of a new trade or business after February 15, 2020 qualify for employee retention credits for the third and fourth quarters of 2021. Automatically. (The only real requirements? The employer needs average gross receipts to not exceed $1,000,000 over the three preceding tax years.)

This is a little absurd. As a policy thing. But your clients will want to know about this. Recovery startup business employee credits run as much as $50,000 for the third quarter of 2021 and $50,000 again for the fourth quarter of 2021. So dig into this wrinkle when you go to prepare your first business entity return for a taxpayer.

Note: We’ve got a longer discussion here of how the recovery startup business employee retention works. See that to get up to speed.

Did you invest in rental property sometime after February 15, 2020?

Even more curious–to me, at least? If a business owner happened to buy a rental property sometime after February 15, 2020? That new rental property counts possibly as beginning to carry on a new trade or business. Which means some business owner who’s bought a rental as a personal investment may inadvertently qualify for recovery startup business employee retention credits.

In other words, the guy who owns an S corporation with employees? If he bought rental property in late 2020, he probably qualifies for up to $100,000 of employee retention credits for 2021. And you need to know that before you do the 2021 tax return.

Note: We’ve got a longer discussion of how real estate recovery startup business credits work here: The $100,000 Real Estate Employee Retention Credit Windfall.

Have you amended 941 returns for 2020 or 2021 for employee retention credits?

You want to know whether an employer amended 941 tax returns for employee retention credits. And for this reason.

If a firm has amended a 941 for employee retention credits, it needs to reduce its wages deduction for the credit. And that accounting may not have gotten done right. So you need to check that.

Example: Some client amended 2020 941 payroll tax returns, claimed a $50,000 refund, but then recorded the $50,000 refund as a reduction in 2021 wages when it got the check in 2021. That sounds right. But it puts the $50,000 reduction in wages into the wrong year. (You need to show the employee retention credit as a reduction in the wages to which the credit applies.)

Have you received employee retention credit refunds?

You probably also want to check on whether an employee has received her, his or their employee retention credit refund claims if they’ve already applied.

One issue here is same one as just discussed. You want to check that the refund transaction gets treated correctly on the tax return.

But a second issue pops up here, too. Those employee retention credits were often tricky to calculate. Especially for small business owners. Accordingly, a good possibility exists that the IRS changed the refund amount once it got around to processing the amended 941-X return.

You and I therefore probably want to use the appearance of the actual refund to double-check the accounting. And to maybe identify when an incorrect amount needed to be fixed.

Example: The client with your help filed a tax return for 2020 that either didn’t reduce the wages deductions for employee retention credits (because you didn’t know then you should do that) or that reduced wages for the wrong amount. In either case, the time to double-check on this? And make any necessary corrections? When the refunds arrive.

Have you applied for Paycheck Protection Program forgiveness?

The PPP loan a client may have gotten only indirectly connects to the employee retention credit.

That connection? An employer can’t use wages it paid with forgiven PPP loan money for employee retention credits.

But the thing is, the PPP forgiveness application provides flexibility to PPP loan borrowers. And a borrower can gain forgiveness for spending that doesn’t “use up” wages that could also plug into the employee retention credit calculations.

Accordingly, you and I probably want to check on whether PPP loan forgiveness has been applied for. And if it hasn’t, we may want to help clients optimize their PPP forgiveness application.

The obvious tricks? Get as much forgiveness as possible for non-payroll-spending. The rules allow a borrower to spend up to 40 percent of the PPP money on things like mortgage interest, rent, utilities, and other items.

Then for the remaining 60 percent that must be spent on payroll? Get as much forgiveness as possible for payroll costs that count toward PPP loan forgiveness but which don’t lead to employee retention credits. So retirement benefits, state and local payroll taxes, group life insurance benefits, owner payroll, owner family payroll and so on.

This approach means you use the least possible amount of payroll that would otherwise produce employee retention credits… Specifically wages for non-owner and non-family employees. And group health insurance benefits for non-owner, non-family members.

Need More Information or ERC Training for Staff?

If you realize some of your staff need more training about how the employee retention credits work, no problem.

We’ve got economical $14.95 paperback book that represents a great way for staff, managers and partners to learn how employee retention credits work: Maximizing Employee Retention Credits.

We’ve also got a number of related articles and blog posts about the employee retention credit and many may be useful for folks still getting up to speed.

The post Employee Retention Credit Checklist appeared first on Evergreen Small Business.

If you’re reading this, you know about the $100,000 recovery startup business employee retention credit.

You know, for example, that if you start a new trade or business after February 15, 2020, you can get up to a $50,000 credit for both the third and again for the fourth quarter of 2021. So, $100,000 in total. Just for starting the new venture.

You maybe even know the credit formula gives you up to seventy percent of the first $10,000 in wages you pay each worker in a quarter.

You may even have worked out that you need employee wages for slightly more than seven employees, minimum, to get the $50,000 credit for the third quarter. And then again for the fourth quarter.

But the tax law leaves some awkward questions unanswered. So, this blog post asks those questions. And it gives my guesses as to how they get answered.

One other note: My thinking here flows from the statutes, the one revenue procedure, and then the three IRS notices that had appeared as of August 16, 2021.

Awkward Question #1: Does the New Trade or Business Need its Own Employees?

The employee retention credit looks at wages an employer pays employees. Accordingly, you might assume that an entrepreneur’s new startup venture needs to pay wages to get the credit.

That’s incorrect though. The entrepreneur just needs one of the trades or businesses he or she owns to pay wages.

Example 1: An entrepreneur owns and operates a restaurant which employs eight employees who together make $72,000 during the third and fourth quarters of 2021. The entrepreneur also opens a second trade or business in early 2021, a plant nursery. But the plant nursery hires no employees in 2021. Nevertheless the new plant nursery trade or business lets the entrepreneur get the $50,000 of employee retention credits on the restaurant employee wages.

What happens, by the way, is the trades or businesses an employer operates get aggregated. That’s why the new trade or business doesn’t necessarily need its own wages. Which is weird, I grant you…

Awkward Question #2: Can the New Trade or Business have Activity Prior to February 15, 2020?

A new trade or business needs to start sometime after February 15, 2020 in order to qualify an employer for recovery startup business employee retention credits. The IRS guidance also makes it clear the new trade or business needs to be fully operating and a going concern in order to get the credit.

Here is the language the only IRS guidance provides on this matter (from IRS Notice 2021-49):

In general, for purposes of section 162, a taxpayer has not begun carrying on a trade or business “until such time as the business has begun to function as a going concern and performed those activities for which it was organized.”

But this begs another awkward question: What if investigation of the new venture begins before the required start date? Or what if preopening activities occur in, say,  2019? Or in January of 2020?

My best-guess answer here: I think the recovery startup business doesn’t start for employee retention credit purposes until a new trade or business meets the Section 162 definition (shown above) and is past the Section 195 startup phase. In other words, what happens before the thing being created actually starts? That doesn’t matter.

This approach means investigation and pre-opening activities (including market research and feasibility studies) occurring on or before February 15, 2020 should not matter.

One would want to be very cautious about a position where some activity half starts in January of 2020 and then only reaches full going concern status after February 15, 2020. But in that situation, that new trade or business would seem to create eligibility for the employee retention credit.

Awkward Question #3: Does the New Trade or Business need to Operate in Third and Fourth Quarter of 2021?

That $50,000 credit a firm may get in 2021 for quarter 3 and again for quarter 4? You’d assume the trade or business that triggers that credit needs to operate in quarter 3 or 4. But I don’t think that requirement in fact does exist.

The requirement says a new trade or business needs to start after February 15, 2020. A new trade or business started on, say, February 16, 2020 might have started, operated and then closed before the start of the third quarter of 2021.

I know. Weird. But that’s the way Congress wrote the law.

One other weirdness here. In order to get a credit for that third quarter of 2021? The new trade or business started after February 15, 2020 needs to start before the end of September 2021. And in order to get a credit for the fourth quarter of 2021? The new trade or business started after February 15, 2020 needs to start before the end of December 31, 2021.

But note that a business started in March of 2020 which then closes in, say, March of 2021? That timing works.

Again, I know. Weird…

Awkward Question #4: What if the New Trade or Business Fails?

A related awkward question: What if the new business fails? Is that a problem?

I think not. Congress knows businesses fail. Presumably, it enacted the recovery startup business credit to address the fact that millions of small businesses have failed during the COVID-19 pandemic.

But here, for the record, I think the business owner needs to be careful. The Section 162 standard for what qualifies as a trade or business? It says the entrepreneur needs to be seeking profits and operating with regularity and continuity.

A real, legitimate trade or business might conceivably fail very quickly. But if the new venture fails too quickly? Gosh, one may want consider the possibility that a quick failure would push an IRS auditor to think about whether the regularity and continuity requirements get met.

Accordingly, if employee retention credits are in play? Possibly a business owner needs to show a little extra patience before deeming the venture a failure and then ending operations.

I also think if you’re trying a risky venture that will probably fail but also might potentially generate a giant reward? You probably want to have a business plan that documents that risk-reward trade-off.

Awkward Question #5: Is there a Minimum Length of Operation Requirement?

A second related question: Is there a minimum length of time the new trade or business needs to operate to get the credit?

The answer here? No, not really. Once you meet the continuity requirement.

And by the way? If you’re thinking this whole recovery startup business credit makes less and less sense, just as policy? Yeah, that thought pops into my head every so often too.

Awkward Question #6: Is there a Size or Income Requirement?

Another good question to ponder, at least for a few minutes: Is there a size or income requirement for the new trade or business?

I think the answer is “No, but…”

Theoretically someone with an existing business generating two million dollars of revenue in 2020 might start a tiny micro-business that generates a few hundred dollars of profits in 2021. And that technically sort of half works.

A quick sidebar: To get the recovery startup business credit, the three-year average revenues for the aggregated employer need to not exceed $1,000,000 a year. So, a firm that generates $100,000 of gross receipts in 2018, $900,000 in 2019 and then $2,000,000 in 2020 has a three year average equal to $1,000,000. And that works.

But I think the problem appears when one looks at the requirement that the new trade or business be operated for profit. Someone with a big small business probably isn’t starting a new microbusiness that generates a few hundred or a few thousand dollars of profit in the pursuit of profit.

Let Me Show You Some Examples

But this would be very relative, at least in my mind.

Example 1: Tom operates a small business that generates $500,000 in annual profits but potentially qualifies for the recovery startup business employee retention credit. He wonders if he can start a new tiny business that will generate $5,000 a year in profits.

Example 2: Pete, Tom’s brother, also operates a small business. It generates $30,000 in annual profits and potentially qualifies for the recovery startup business employee retention credit. He also plans to start a new tiny business that will generate $5,000 a year in profits.

Think about the two preceding examples… It’s hard to argue that Tom’s new tiny business seeks profits if Tom operates a trade or business that already makes a mid-six-figures profit.

Pete’s situation differs from Tom’s situation in my mind. A new business that adds $5,000 a year to his existing $30,000 a year of profits? A nearly seventeen percent bump in profits? Gosh, yeah, sure. That seems very likely profit motivated.

One other thing about this to consider. You the entrepreneur make a decision to pursue some venture based on what you hope might happen. If your tax return with the employee retention credit ever gets examined by the IRS? The IRS auditor will be looking at what revenues or income your venture actually generated. This difference in perspective might cause issues during an audit.

Example 3: You start a business you hope generates $100,000 in annual profits. You spend hundreds of hours working on the opportunity. And you get $100,000 of employee retention credits. The venture fails to live up to your expectations, unfortunately, producing only $1,000 of annual profits. If the IRS audits your employee retention credits, it may view the venture as less profit motivated than it actually was.

The only thing I can come up with here? Do a business plan. Document the hope that the new venture may deliver a big reward.

Awkward Question #7: Does Rental Property Count as a Trade or Business?

I’m a little nervous about this. But yes, I think you buying a new rental property probably can count as a new trade or business.

An earlier blog post here goes into the details: The $100,000 real estate employee retention credit windfall.

Awkward Question #8: Can an Acquisition of an Already Operating Trade or Business Count?

Good question… So just to be clear, if you go open up a new retail store that probably counts as a new trade or business. This should be the case, for example, if you’re not already a retailer.

But what about if you go buy a retail store that’s already operating. The retail trade or business is new to you. The way a used car is new to you. Does that count?

I think so based on the language that comes right out of the statute Congress wrote and the President signed:

The term “recovery startup business” means any employer… which began carrying on any trade or business after February 15, 2020,

So mull that over. And then consider the scenario where you or I go out and buy an already operating retail store sometime after February 15, 2020… That would pretty clearly seem to be you or me beginning the “carrying on” of a trade or business after February 15, 2020.

Awkward Question #9: What are the Chances of Audit?

A final question: What chance or risk is there you’ll be audited?

First the stipulation: Whether or not you risk an audit should make no difference in you claiming the credit. What matters is whether you can meet the law’s and the notices’ requirements.

I know, I know. We both already know that. But I wanted to say it anyway.

But second, this comment because some folks will maybe tend to think about the employee retention credits like the Paycheck Protection Program (PPP) operated by the Small Business Administration.

In comparison to the PPP, where your odds of getting audited run very, very low, I think the odds of an audit of an employee retention credit refund claim run pretty high.  In relative terms.

This is back of the envelope math. But my thinking focuses on fact that the Treasury Department and the IRS employ a large number of employees including an army of IRS auditors. So way, way way more manpower to deploy in looking at employee retention credits. (The IRS employs more than 80,000 employees. The Small Business Administration employs about 3,000 employees.)

And then far fewer employee retention credits look to be claimed than PPP loans got made. More than five million borrowers got PPP loans. At mid-year, according to news reports, maybe 30,000 employers had requested employee retention credits.

Combine the larger number of auditors with the small number of taxpayers, voila, I think the odds of a firm getting audited on an employee retention credit run way higher than the odds of a PPP audit by the SBA.

A wild guess? Say a thousand times higher?

The point I’m offering up then: Don’t think the employee retention credit opportunity works like the PPP loans. You’ll need to be more careful. And do a better job with your calculations.

Closing Comment

You know those people who didn’t get PPP loans because they just couldn’t believe they were real? You don’t want to make that sort of mistake with employee retention credits. No way…

But spend some time asking the awkward questions now. If you do get asked the same questions later on, you will have better answers by doing so.

More Information

You can get our Maximizing Employee Retention Credits book from Amazon here: Maximizing Employee Retention Credits.

Dan Chodan’s blog post about owner wages. explains how owner wages plug into the employee retention credit formulas. That’s really important stuff.

This blog post talks more about the Recovery Statup Business Employee Retention Credit.

Finally, this blog post talks about steps an employer can take to boost their credits: Three Tips for Bigger Employee Retention Credits.

The post Recovery Startup Business Employee Retention Credit: Nine Awkward Questions appeared first on Evergreen Small Business.

And then the reason I’m writing this. And sorry to suggest this. But I’m thinking you may be a member of a local church, mosque, temple or synagogue which has similarly missed this opportunity. Or that maybe you spend time working with a local charity and that that organization has bungled the opportunity.

So I want to go over the details of the employee retention credit as it connects to tax-exempt organizations. Give you some examples of tax exempt employee retention credits. And then end with providing some next steps you may want to take so the tax-exempt organizations you care about get a tax benefit that Congress intended and provided them.

Section 501(c) Organizations Qualify

The first thing to know: Tax-exempt organizations get to take employee retention credits on W-2 wages.

More precisely, any of the tax-exempt organizations described in Section 501(c) qualify. That means the house of worship you attend. It probably means the not-for-profit organization you volunteer at. It probably includes any social or fraternal organizations you join.

The credits can be as much as $5,000 per employee per year in 2020 and as much as $7,000 per employee per quarter in 2021.

In 2020, the employee retention credit equals up to 50 percent of the wages paid to an employee but no more than $5,000 for the year.

In 2021, the employee retention credit equals up to 70 percent of the wages paid to an employee but no more than $7,000 for the quarter.

Eligibility Works Roughly the Same

Next thing to note? A tax-exempt organization becomes eligible the same way a regular for-profit trade or business does.

It can start a new trade or business.

A government order can fully or partially suspend its operations.

Gross receipts can decline by more than fifty percent in 2020 or more than twenty percent in 2021.

Different Accounting for Gross Receipts

The one wrinkle about the above rules? The gross receipts accounting works differently for tax-exempt organizations.

For-profit trades or businesses use the accounting rules described in Section 448 of the Internal Revenue Code. Tax-exempt organizations use the accounting rules described in Section 6033 of the Internal Revenue Code.

In one of the IRS notices that explain how to calculate and claim refunds, the IRS goes into the details. But I’m going to copy and paste the meat of that guidance here:

‘gross receipts’ means the gross amount received by the organization from all sources without reduction for any costs or expenses including, for example, cost of goods or assets sold, cost of operations, or expenses of earning, raising, or collecting such amounts. Thus, gross receipts includes, but is not limited to, the gross amount received as contributions, gifts, grants, and similar amounts without reduction for the expenses of raising and collecting such amounts, the gross amount received as dues or assessments from members or affiliated organizations without reduction for expenses attributable to the receipt of such amounts, gross sales or receipts from business activities (including business activities unrelated to the purpose for which the organization qualifies for exemption), the gross amount received from the sale of assets without reduction for cost or other basis and expenses of sale, and the gross amount received as investment income, such as interest, dividends, rents, and royalties.

Tax Exempt Employee Retention Credits vs. Paycheck Protection Program

One other thing to mention. In talking with staff at tax-exempt organizations, I’ve heard people mention that they believe they don’t qualify for employee retention credits because the organization received a PPP loan.

That’s sort of true. Or was true. But you want to understand the history and the details here.

Originally, an employer chose between employee retention credits and the paycheck protection program (PPP). Firms that received a PPP loan, in the beginning, got disqualified from getting an employee retention credit.

Later changes to the law tweaked this, however. And the new rule says you cannot not get employee retention credits for wages paid using PPP money.

For example, say a nonprofit organization paid $300,000 in wages but used a PPP loan to pay $100,000 of the wages. In this case, it can only get employee retention credits on the $200,000 of wages not funded by PPP money.

Some Examples of Tax Exempt Employee Retention Credits

Let me quickly provide some examples of tax-exempt organizations getting employee retention credits.

I’m going to paint in broad brushstrokes here to get you thinking about how this might work for tax-exempt organizations where you participate.

Government Orders Closed Worship Services

A first example: Say state or local government orders prevented your church, temple, synagogue or mosque from holding worship services from March 15, 2020 through May 31, 2021. You guys should qualify for employee retention credits during that period time. Even if you cobbled together some sort of online substitute service.

Substantial Decline in Contributions

A second example: Say a not-for-profit organization saw contributions and activity decline as the pandemic ramped up as compared to 2019. Maybe the organization usually collects dues and fees from members for activities and those activities stopped in the spring of 2020 and are only just now beginning to restart.

If gross receipts declined by more than fifty percent for some quarter of 2020 as compared to the same quarter of 2019? Your non-profit qualifies.

If gross receipts decline by more than twenty percent for some quarter of 2021 as compared to the same quarter of 2019? Your non-profit qualifies.

Note: This other blog post explains how substantial declines in gross receipts work: Full or Partial Suspensions.

New Trade or Business

Employers may also qualify for employee retention credits in the third and fourth quarter of 2021 if they begin carrying on a new trade or business after February 15, 2020. That may not happen as commonly with tax-exempt organizations, but a couple of quick examples show how a new program or initiative might work.

Suppose a tax-exempt school opens a food bank to support some of its students’ families. Perhaps the food bank is response to the economic hardship created by the COVID-19 pandemic. That food bank can probably qualify the tax-exempt organization for employee retention credits.

Another example: What if a religious organization buys rental property to provide housing to families threatened with homelessness due to pandemic-related unemployment. That rental property can probably qualify the tax-exempt organization for employee retention credits.

Note: We talked about how the recovery startup business employee retention credits works here, Recovery Startup Business Employee Retention Credits, and how rental properties can trigger employee retention credits here, $100,000 Real Estate Employee Retention Credits. But the same general principles should apply for a tax-exempt organization.

Next Steps for Tax Exempt Employee Retention Credits

Talk with your tax-exempt organization’s treasurer. Or the accountant or the bookkeeper. (If they don’t understand the rules well enough to help you, you can contact us here. We will even do an initial free consultation.)

You want to move quickly. The easiest way to get the credit is when you file the quarterly 941 payroll tax return.

You can also go back and amend prior quarter 941 payroll tax returns. That’s more work. And the organization waits many weeks for the money.

Need More Information or ERC Training for Staff?

If you realize some of your staff need more training about how the employee retention credits work, no problem.

We’ve got economical $14.95 paperback book that represents a great way for staff, managers and partners to learn how employee retention credits work: Maximizing Employee Retention Credits.

We’ve also got a number of related articles and blog posts about the employee retention credit and many may be useful for folks still getting up to speed.

The post Houses of Worship and Nonprofits Miss the Boat on Employee Retention Credits appeared first on Evergreen Small Business.