How KBKG Helps CPAs With the Employee Retention Credit
Thought Leadership by KBKG
Two years after the CARES Act established the Employee Retention Credit, CPAs are still handling ERC (or ERTC) tax credit claims. With this credit’s many complex details, a meticulous approach to ERC filings is essential. KBKG offers industry-leading knowledge and services on complex tax issues. Keep reading to review basic ERC guidelines and learn how KBKG can help you complete these claims.
Table of Contents:
A Quick Overview of the ERC Tax Credit
COVID-19 severely impacted American businesses. With our economy depending on both employers and employees, Congress passed the Coronavirus Aid, Relief, and Economic Security Act. It initially allowed employers to claim 50% of eligible wages paid from March 13 to December 31, 2020.
Three laws passed in 2021 — the Relief Act, the American Rescue Plan, and the Infrastructure Investment and Jobs Act — expanded the credit amount and eligibility guidelines. The Relief Act created Employee Retention Credit 2021, permitting companies to claim wages paid between January 1 and June 30. The American Rescue Plan extended the credit from July 1 to December 31. However, the IIJA set a retroactive cutoff date of September 30. Only recovery startup companies can claim credits for Q4 2021.
Credit Eligibility and Amounts
Together, these laws set down guidelines for businesses claiming the ERC. Taxpayers must meet one of three criteria for eligibility:
- Had full or partial operations stoppage from COVID-related governmental orders that affected commerce, travel, or group meetings
- Experienced significant reduction in gross receipts in 2020 or the first three quarters of 2021
- Met the qualifications as a recovery startup business and severely financially distressed companies
Under the CARES Act, up to $10,000 of each employee’s wages and certain health care benefit costs were eligible, and taxpayers could claim up to $5,000 per employee. Those with under 100 full-time employees in 2019 could receive credit for all of them. For the 2021 ERC, employers could get 70% of the wages and certain health care benefit costs they paid to each eligible employee per quarter. With an upper limit of $10,000, they could claim up to $7,000 quarterly.
Complex Requirements and Calculations
While it’s easy to find information about ERC guidelines, they can still be difficult for many taxpayers to understand. Firms specializing in tax filings must diligently prepare claims to avoid negative consequences. The IRS specifically defines every aspect of the ERC, including what constitutes a significant decline in gross receipts and which companies can qualify as recovery startup businesses and severely financially distressed companies
ERC Scams and Improper Claims
The ERC offers significant benefits to eligible taxpayers. It is no surprise that unscrupulous companies are taking advantage of the situation. They promise to help taxpayers receive large amounts of money with ERC claims. Targeting businesses of all sizes, these scammers purport to produce successful filings regardless of taxpayer eligibility status.
The IRS has issued several warnings about improper ERC filings, but these claims continue to abound. The IRS has trained over 300 agents in spotting fraud to review ERC filings. Consequences for improper claims include repayment of tax credits with penalties and interest. Because there are no requirements governing ERC filing firms, taxpayers must bear the negative impacts.
KBKG’s World-Class Expertise and Services
You can rest easy knowing that we perform due diligence in preparing all ERC claims. Your clients should be able to trust that you can help them avoid ERC pitfalls. By partnering with KBKG, you can underline your trustworthiness while benefiting from our counsel and services. We start by determining whether the taxpayer is eligible and for which quarters. We can then aid with filings in several vital ways:
- Identify qualifying employee wages
- Compute ERC amounts and PPP loan effects
- Reconcile actual credits with advance credits
- Prepare adjusted data to complete Form 941-X
- Create accurate documentation to support ERC eligibility
Trust Our ERC Tax Credit Solutions
Certified public accountants need advanced expertise when producing ERC claims filings. For over 20 years, KBKG has provided that expertise with turnkey tax solutions and value-added services. Contact us online for specialized ERTC tax credit assistance. You can also call (877) 525-4462, extension 259.
Curious to know more about the ERC credit? Request a proposal now.
KBKG is providing the following services to assist with ERC:
- Determine if the employer qualifies, and if so, for which quarters,
- Determine which employee wages qualify
- Calculate credits, including analysis of PPP interplay, and
- Reconcile actual credits with advance credits requested
- Prepare reconciled data for Form 941-X
- Prepare documentation supporting a business’ qualifications