What is the Employee Retention Tax Credit?

The Employee Retention Tax Credit (ERTC) is a refundable tax credit for businesses that continued to pay employees while suspended due to the COVID-19 pandemic, had significant declines in gross receipts from March 13, 2020 to Sept. 30, 2021, or are considered a Recovery Startup business.

Who is an Eligible Employer?

An employer is eligible for the ERC if they:

•  Sustained a full or partial suspension of operations limiting commerce, travel or group meetings due to COVID-19 and orders from an appropriate  governmental authority or 
• Experienced a significant decline in gross receipts during 2020 or the first three quarters of 2021 or
• Count as a recovery startup business in the last two quarters of 2021.

My CPA said I do not qualify because I do not have a decrease in revenue. Is this true?

No, as outlined above, there are 3 separate ways to qualify for the ERTC. Revenue decrease is just one of the three ways. Because the IRS has changed their guidance on the ERTC there has been a lot of confusion and therefore misinformation about this program.

What are some examples of mandates and restrictions that would qualify my companies?

• Limitation of an employer’s customer/store capacity.
• An employer’s suppliers are unable to make deliveries of critical goods or materials due to a governmental order that causes the supplier to suspend its operations.
• An employer is required to move to an “online format” or “telework” that results in the operations of the business not continuing in a comparable manner as if the business were open regularly.
• An employer’s workplace is closed by a governmental order for certain purposes, but the employer’s workplace may remain open for other purposes or the employer is able to continue certain operations remotely.
• An employer that reduces its operating hours.
• Employers that operate a trade or business in multiple locations and are subject to state and local governmental orders limiting operations in some, but not all, jurisdictions.
• ***Mask mandates are NOT a qualifying factor for ERTC.

When does the refund arrive?

The refund will be sent in the form of a check for each quarter directly from the IRS to the address listed on the business 941-X form that you mail in. The turnaround time for the IRS to send the refund is approximately 4-8 months.

When is payment due?

Payment is due upon receipt of final forms. Invoices are emailed to you on the same day you receive refund amounts and final forms. Payment can be submitted by either you or your client, via credit or debit card, through the invoice. It is our typical policy in our Live Filing Department to not release documents until payment is received. However, to expedite processing in our Group Filing Department, we will release documents with the understanding that invoices are paid within a few days of receipt, no more than 1 week after the final forms and invoice are sent.

What final forms will I receive?

• 941-X
• 941 “As Amended”
• Worksheet 1 or 4
• Employee Eligible Wages Breakdown

You will need to print, sign, and mail all of the final forms to the IRS **separated by quarter. (You do not need to mail the instructions page or the breakdown of eligible wages)

How am I protected against an IRS audit?

On March 7th, 2023 the IRS released the following notice: https://www.irs.gov/newsroom/irs-issues-renewed-warning-on-employee-retention-credit-claims-false-claims-generate-compliance-risk-for-people-and-businesses-claiming-credit-improperly. In this notice the IRS warns all business preparers to avoid filing with ERC preparers that charge a percentage of the refund received by a company. It was found that these companies are often times engaging in predatory practices of price gouging and negligent over-filing where businesses are filing for more ERC credit than they are due. It is for this reason that ERTC Filing made the decision early on to charge a flat fee for services that was not dependent on the refund the business received. This practice helps to avoid the potential for overfilling. Furthermore, ERTC Filing provides specific steps to help avoid audit complications including providing all businesses with specific breakdown for eligible wages and eligible medical used in the calculations for ERTC. Furthermore, at the end of every filing the specific rules that qualified that business for their ERTC will be provided including any mandate that qualifies a business under the partial or full shutdown rules.

What is a “significant decline in gross receipts”?

A significant decline in gross receipts begins with the first calendar quarter in 2020 in which an employer’s gross receipts are less than 50 percent of its gross receipts for the same calendar quarter in 2019. The significant decline in gross receipts ends with the first calendar quarter that follows the first calendar quarter in which the employer’s 2020 quarterly gross receipts are greater than 80 percent of its gross receipts for the same calendar quarter in 2019, or with the first calendar quarter of 2021. For Jan. 1, 2021, through Sept. 30, 2021, a significant decline in gross receipts means a calendar quarter in 2021 where gross receipts are less than 80% of gross receipts for the same calendar quarter of 2019, and the following quarter.

How do I get a status update from the IRS on the ERTC?

You can call the IRS directly at (800) 829-4933, option 3. Please note when calling the IRS you may be on hold for extended periods of time.

Does ERTCFiling.com submit my ERTC forms to the IRS for me?

No, we are a software as a service company, meaning we populate the forms you need to send to the IRS with the correct ERTC amounts for each quarter your company is eligible. You will need to send the final forms to the IRS directly by mail separately per quarter.

Can I still receive ERTC if I received a Paycheck Protection Program (PPP) loan?

Yes, but not for the same wages. The amount of qualified wages for which an eligible employer may claim the ERTC does not include the amount used for forgiveness of the Paycheck Protection Program (PPP). You may however use funds received from the Paycheck Protection Program (PPP) as long as those funds are not included in the amount used for forgiveness. (The IRS has not updated their FAQ section for this subject. For reference from the IRS on rules related to obtaining both the PPP and ERTC see IRS Notice 2021-20).

What if my company already claimed ERTC in some quarters?

If you are unsure if the previously filed ERTC amounts are correct, we can correct any mistakes and make sure your company receives the maximum ERTC amounts for all previously claimed quarters.

Is the ERTC considered taxable income?

Yes, funds received from the ERTC are considered taxable income and need to be reported in the period the ERTC is originally claimed. Although the ERTC is not in itself taxable as it is considered a tax credit, the net effect of receiving the ERTC increases your income taxes as you are not allowed to take as an expense any payroll expenses paid for by the ERTC. For further clarification speak with your CPA or income tax professional.

Can I still claim ERTC if my company used a PEO?

We can not process ERTC forms for clients with a PEO. If you have a company that used a PEO (Professional Employer Organization), we need to know prior to beginning our data processing. Please contact your PEO directly to file for ERTC.