ERC/ERTC FAQs
The Employee Retention Credit (ERC) is a refundable payroll tax credit created under the CARES Act to help employers continue paying employees and keep businesses running during the economic fallout caused by the Coronavirus. The ERC provides employers that meet eligibility requirements with a credit against qualified wages and health plan expenses, leading to ERC refunds for many businesses. It helped U.S. companies stay afloat due to the shutdowns caused by the COVID-19 pandemic, but now there are millions of unclaimed dollars available and nearly any company impacted by the pandemic is eligible to claim their credit today.
Your business may qualify for the Employee Retention Credit if it meets the following ERC eligibility qualifications:
- Your business is based in the USA.
- Your business employed less than 500 employees in 2019.
- EITHER your business saw a significant decline in revenue during the pandemic OR you needed to modify business operations in order to comply with COVID-related government orders, such as partial shutdowns, reduced operating hours, social distancing orders, customer capacity limits, etc.
If your business meets the ERC requirements above, it likely qualifies for a significant tax credit. Contact Omega to determine if your business is in fact, eligible.
If your business is a startup that began operations following February 15, 2020, you may qualify for an ERC refund through the Recovery Startup Credit without meeting the above requirements. Read more about the Recovery Startup Credit down below.
When first introduced as part of the CARES Act in 2020, the maximum credit allowable under the ERC/ERTC was $5,000 per employee. With its renewal and expansion under the Consolidated Appropriations Act (CCA), 2021, the maximum credit increased to $21,000. When the ERC/ERTC and the Paycheck Protection Program (PPP) were rolled out under the CARES Act, businesses had to choose which to use. Many selected PPP because it was easier to sign up for a Small Business Administration-backed loan than to learn the details of eligibility for ERC/ERTC. However, subsequent legislation expanded the eligibility requirements for employers so that they could now receive both, making this a can’t-miss opportunity for businesses.
Though the Infrastructure Investment and Jobs Act (IIJA) of 2021 moved up the ERC/ERTC’s expiration date, effectively repealing the program for the fourth quarter of 2021, companies are still allowed to submit their payroll tax filings for the covered periods. Employers who filed their payroll taxes in 2020 were able to deduct the money directly from their quarterly payroll taxes at that time. Those who didn’t file in 2020 or who are claiming the ERC/ERTC for the first time on their payroll taxes in 2021 will be refunded for quarterly filed periods.
The ERC/ERTC is a federal credit taken on a business’ quarterly payroll taxes, not the business’ taxes, based on how many full-time employees (30+ hours) the company had for the eligibility period. The credit calculation is based on qualified wages paid per employee each quarter. In 2020 the refundable tax credit was 50% of qualified wages up to a $5,000 maximum. In 2021 it was 70% of qualified wages up to $21,000. The IRS issues a refund check in the amount of the credit claimed.
If a business meets the eligibility requirements for the ERC/ERTC, the credit can be claimed on previously filed payroll tax forms. ERC/ERTC specialists working in accounting departments and for tax preparers can quickly evaluate whether a company is entitled to the credit and provide any needed guidance. If the criteria are met, these professionals can file amended payroll tax returns for the qualifying quarters and submit them to the IRS.
The Employee Retention Credit is not a scam. The ERC is a real tax credit created by the CARES Act. The IRS is still accepting retroactive ERC claims and awarding refunds on payroll taxes paid in 2020 and 2021.
Employee Retention Credit Eligible Employers are any who were in business during calendar years 2020/2021, including any tax-exempt organizations, that either:
- Fully or partially suspended operations by a governmental order, or
- Experienced a significant decline in revenue during at least one quarter of 2020 or 2021, when compared to the same quarter of 2019
We can’t be certain as laws and executive orders can change at any time, but the IRS has recently released guidance for 2022.
R&D FAQs
Almost any business that undertakes legitimate research to develop a product, service, or platform–research as a key business function–is very likely to be eligible for the credit. Contact us today to find out more.
R&D tax credit eligibility applies to much more than product development. It also includes operational advances such as manufacturing methods, software engineering and development, and even quality enhancements. Seed stage or early start-ups may be able to utilize the R&D tax credit as well, with potential to claim credit against payroll tax for up to 5 years. If your LLC or corporation does any of the following, your company is likely to qualify for a Research & Development tax credit: 1. Enhancement of Current, Existing Processes and/or Products 2. Development or Design of Innovations/New Products Or Processes 3. Improvement of Existing Prototypes and/or Software
While the R&D credit is available to benefit any business, the Treasury isn’t making the awarding of funds a sure thing. Omega Accounting has a team of professionals who can interpret and quantify the relevant activities of your business. Frequently, companies which have claimed a credit (without professional guidance and research) leave eligible claims on the table due to misinterpreting the tax code. The credit tax code has been updated many times within the last 5 years, even more so than in the previous 30!
Wages, Sub-Contractor Payments, Materials & Supplies, Electronics/tools for research and development. These items along with evidence-based employee declarations establish an R&D tax-credit claim. Omega Accounting’s professional team will work with you to substantiate any claims, conforming to relevant I.R.S. guidelines and Treasury regulations.
Start-ups and smaller businesses which qualify, can apply for up to one and a quarter million dollars (or $250,000 each year for no more than five years) of US Federal R&D tax credits, when used against liabilities for the Federal Insurance Contributions Act (FICA) portion of annual payroll tax. Startups and SMBs which have less than $5,000,000 in receipts for a credit year and which have no more than 5 years of gross receipts can qualify.
Business Intelligence FAQs
Omega approaches each client with a stakeholder mentality. Based on financial and operational data, Omega’s custom key performance indicators help business owners and managers understand how their business is performing at any given time.
Our team of in-house developers can integrate all of your data sources: accounting, time-keeping, ERP, CRM, and many others, so your data can be viewed and analyzed using a single reporting tool with dashboard, actionable metrics linked to your detailed data. We connect to all your data sources and promote insights across your organization while ensuring data integrity, accuracy and security.
Reports and dashboards are available on your own secure portal and can be viewed on any desktop or mobile device.
Short answer, yes. Most businesses have data in many back-end systems. Sometimes data is manually duplicated to multiple systems for reporting purposes. Our developers will pull data from all the systems together for our business intelligence reporting. We can also build automation routines to move data quickly and accurately between back-ends if necessary.
We can help your company install or migrate to a new software platform. We have experience with many of the most widely used business applications. We can make recommendations and create implementation plans. We can also manage the entire project through implementation and onsite training.
Fractional Business CFO FAQs
The CFO Deep Dive provides proper review and analysis of financials, ERC and PPP Loan Potential Tax Impacts, benchmarking to industry peers, CPA and current tax strategy, projected tax liability and projections for remaining open months of the year, trends, key ratios, and potential tax strategies for CPA review.
Your annual insights, potential year-end income, and insights all to be shared with the tax preparer for annual tax planning.
The CFO Deep Dive offers the reporting and insights needed to forecast what’s ahead, saving you and your business from some serious headaches.