PBO Advisory Group continues to field questions about the Employee Retention Tax Credit (ERTC) program. We are finding that many employers don’t believe they qualify. On the contrary, a majority of businesses do meet the eligibility standards. As with many governmental guidelines, the qualifications need additional explanation and interpretation.
Scott Palka, PBO Advisory Group’s Consulting CFO, recently participated in a webinar hosted by the Found Money Group at which he discussed how the ERTC should be carefully reviewed and interpreted as the benefits are great. Companies can receive up to a $33,000 tax credit per employee. Scott and the PBO team are seeing several clients qualify for millions of dollars in total credit.
While it is easier to qualify for the ERTC in 2021 due to changes in the act, Scott advises that 2020 eligibility shouldn’t be overlooked. He encourages everyone to take the time to investigate and validate whether you qualify for either or both years. The PBO Advisory team can usually help you determine eligibility in a half hour or so phone call.
Here are a few of the questions our team receives on a regular basis:
Q: My company’s revenue has not declined. Am I eligible for the ERTC program?
A: One significant misconception about the ERTC is that a company’s revenue must have declined during the eligible time periods in 2020 and/or 2021. However, companies with flat revenue were and continue to be impacted by the pandemic. By analyzing the sources of your revenue and the way in which your operations were affected, you may find you are eligible even if your income wasn’t adversely affected.
Q: Our company didn’t pay income tax in 2020. Does that disqualify us from the ERTC?
A: Credit is given based on payroll taxes paid by a company, not income tax. Companies that paid employment taxes but did not pay income tax are eligible for the ERTC.
Q: We are in a Professional Employer Organization (PEO). Are we exempt from the ERTC program?
A: PEO membership does not exempt a company from applying for the ERTC.
Q: How does a company apply for the ERTC?
A: Applying for the credit is done so on Form 941. If you file electronically, you may receive your 2020 refund check within six weeks. If you file manually, it could take up to six months or more.
The following slides from Scott’s recent presentation provide more information. We can’t stress enough that you should not assume your company is ineligible. As noted above, the guidelines must be carefully interpreted and applied to your company’s unique situation.
For more information or to find out if you qualify for the ERTC, please contact Scott Palka.