I hope you have managed to stay safe and well! We focus on resolving tax issues in Prince William County and throughout the lower Northern Virginia area.
In case you’re unaware, in an effort to battle the effects of the COVID-19 pandemic on the public and business owners, the federal government created rules and regulations allowing some business owners with payroll to claim a credit for retaining their employees during the height of the pandemic. This program was separate from, but closely relate to the Paycheck Protection Program which has received so much scrutiny and ire from politicians to everyday citizens. While, the pandemic has been declared over and done with, businesses are still eligible to apply Employee Retention Credit (ERC), also referred to as the Employee Retention Tax Credit (ERTC).
Unfortunately, concerns have started to arise over aggressive tactics by some firms in calculating and claiming the ERC. Multiple businesses have recently indicated that their claims for the ERC are being audited by the IRS. If you feel you have taken liberties with this program, now might be the time to double check your calculations and analysis, especially if you think you or your advisor may have taken aggressive positions. It’s a good rule of thumb to keep in mind that claiming the ERC is little different from claiming a deduction on an income tax return (both are done under penalties of perjury)
While the discussion of the calculation of the ERC is a little out of the scope for the discussion here, some guidelines to keep in mind when making the claim (or going back over a previously made claim) are: You have up to three (3) years retroactively to make the claim; Pay attention to the time period you’re applying for and make sure not to mix the periods; be mindful of the parameters, i.e. if you’re applying for the 2020 time period, your business must have experienced a decline in sales of more than 50% from 2019; properly account for “Qualified” wages, which depend upon the size of the business, essentially more than 100 employee business can only claim credit for the workers that they kept, while those businesses with fewer than 100 employees can claim credit for all workers.
The ERC can get very technical in nature, and the above information just presents some of the guidelines you should be adhering to when trying to make the calculations or review the calculations for a claim that has already been made. Don’t be scammed by the ERC Solicitors out there with wild claims of grand refunds and using “only” the slightest fraction of the credit to pay for their services.
If ever you’re feeling overburdened by your tax situation or you’d rather be doing something else with your time, just remember we’re here to help you with all of your tax preparation, resolution/representation needs. Now and in the future. Don’t put off addressing your tax situation. Feel free to contact us with any questions you may have in approaching your specific tax scenario.