Maybe someone has called you about the ERC, or you’ve probably heard of it elsewhere, but if you haven’t been filled in with the details and how it can help your business, then this episode is for you!

ERC stands for Employee Retention Credit, which was ushered in as part of the CARES Act in March 2020, providing financial assistance to business owners. It’s incredibly underutilized and many businesses don’t know about it because it was introduced alongside the Paycheck Protection Program or PPP loan.

In today’s discussion, Patrick Moran, president of consulting firm Royse Partners Limited, shares his knowledge of the ERC that business owners can take advantage of, and see if this is the right fit for your business!

Here are some power takeaways from today’s conversation:

  • What is the ERC?
  • The two avenues of qualification
  • Who qualifies for ERC
  • Considerations for the utilization of funds
  • Doing due diligence when looking into this program
  • What the IRS audit looks like and seeking audit protection
  • The statute of limitations

Episode Highlights:

[04:36] The Two Avenues of Qualification

There are two avenues of qualification that businesses can look into. The first avenue is the Financial Impact Test. There are seven eligible quarters for this program Q1-Q4 of 2020 and Q1-Q3 of 2021. To determine if one of those quarters qualifies for the ERC, 2019 is used as the baseline year for comparison. The IRS has outlined that as the baseline, being the last normal year before COVID. For instance, to determine if you qualified for Q2 in 2021, you would compare that back to Q2 of 2019.

The second avenue focuses on the operational impact. Instead of looking at a financial metric, they will be evaluating some type of operational metric. It has to capture an aspect of your business that is more than nominal, which is a part of your business that makes up 10% or more of your whole business.

[11:26] Who Qualifies for ERC

Regardless of the industry or state, anyone could be eligible for this program. This credit is not for a government entity. This is immensely difficult for publicly traded companies and foreign ownership. It all comes down to your facts and circumstances.

Just because you did better during the pandemic does not rule you out of this program. Secondly, just because you took a PPP loan does not make you ineligible either. At the end of the day, if you are looking into this, make sure you remain an intelligent and informed consumer. Do all the research you can in order to make those decisions when vetting potential firms to work with.

[14:57] Consideration for the Utilization of Funds

The ERC is a fully refundable tax credit. It comes back to the business in the form of a check and then distributed to the business owners. It is a cash refund back into the business. It’s not like the Paycheck Protection Program, where it was a loan that could be forgiven if utilized for the proper allocations outlined by the SBA.

Resources Mentioned:

https://roysepartners.com/

Email: [email protected]