Pub. 3 2021 Issue 5

S E P T E M B E R / O C T O B E R 2 0 2 1 20 nebraska cpas THE 10 BIGGEST MYTHS (MISSED OPPORTUNITIES) WITH THE EMPLOYEE RETENTION CREDIT BY RICK MEYER , CPA, MBA, MST The Employee Retention Credit (ERC) is huge! In March 2021, this credit was extended through Dec. 31, 2021, and expanded, as part of the American Rescue Plan Act of 2021 (ARPA). But, let’s face it, many of us CPAs, the highly trusted, value-added professionals, are “blowing it.”We are not fully understanding the nuances and complexities of this expanded law. As a result, we are not properly educating and helping our clients with this large, refundable credit. So, what’s our misunderstanding about this credit? Let’s review. The ERC is a tax credit first put in place last year as a temporary coronavirus-relief provision to assist businesses in keeping employees on payroll. It has definitely helped. Businesses have received tens and hundreds of thousands of dollars in tax credits for the ERC. This boatload of cashf low has provided a night-and-day difference for those companies struggling to keep employees on payroll and their doors open. However, we have also seen many companies close their doors— just not enough cash to survive. I ponder, were we there to help educate them about the new enhancements of the ERC? Did we help them get the ERC and the maximum amount allowed by this new enhanced law? Did we help them with the proper documentation so they could qualify for the ERC in order to pass muster with the IRS? TheTop10Mistakes&MisunderstandingsSurrounding the ERC 1. My client can’t claim ERC if they’ve already claimed PPP (Paycheck Protection Program) or had their PPP loans forgiven. Now you can claim both! Congress, in the Consol idated Appropriations Act (CAA) of 2021, removed the limitation on only claiming one or the other. PPP will only account for two and a half times your monthly payroll expenses and is meant to be spread out over six months. This leaves plenty of uncovered wage expenses for claiming ERC. 2. My client’s business did not have a drop in gross receipts of 50% or more. The CAA has changed the qualifications so that a reduction of 20% now qualifies. BUT remember there is also another way to qualify for the ERC. If your business has been subject to a partial or full suspension due to a government order, see the next point. 3. My client’s business was not shut down during the pandemic. Even a partial suspension order by the government (federal, state, or local) of your client’s business could potentially qualify. For instance, a partial shutdown, a disruption in their business, inability to access equipment, having limited capacity, shutdowns of their supply chain or vendors, reduction in services offered, reduction of hours to accommodate sanitation, shut down of some locations and not others, and shutdowns of some members of a business are all scenarios that still potentially qualify for the ERC. The key considerations are: Due to the government ordered partial (or full) suspension is/was your client’s business not able to continue