How KBKG Helps Small Businesses With the ERC

Thought Leadership by KBKG, 4/19/2023

Everything about business taxes is complex. Mistakes can become costly, especially with detailed filings such as the c. As a business owner, you must focus on strategic planning and operations. With extensive experience and robust solutions, KBKG helps small companies such as yours understand and produce high-quality, accurate, and error-free ERC (or ERTC) tax credit claims.


Table of Contents:


What Is the ERC Tax Credit?

The Employee Retention Credit came out of the CARES Act of 2020. Its purpose was to help ensure employees could still receive wages while their companies had to close. In 2021, Congress modified and extended the credit with three subsequent laws: the Relief Act, the American Rescue Plan, and the Infrastructure Investment and Jobs Act. These regulations established tax credit amounts, applicable periods, and qualification criteria.

Who Can Qualify for the ERC?

The Internal Revenue Service published three basic requirements for businesses claiming the ERC. Taxpayers must meet one of these criteria:

  • Experienced partial or complete operational suspension caused by COVID-related governmental orders that limited commerce, travel, or group meetings
  • Affected by a significant reduction in gross receipts during 2020 or the first three quarters of 2021
  • Met the IRS definition of a recovery startup business and severely financially distressed companies

While these criteria look simple at face value, the IRS has more detailed guidelines. It specifies the minimum percentage of decline for gross receipts in each year. Recovery startup businesses and severely financially distressed companies must meet certain IRS eligibility requirements.

The agency also defines which employees’ wages are eligible for the ERC. It prevents companies from claiming wages of majority shareholder-employees — those with over 50% ownership.

IRS regulations also prohibit claiming the ERC for family members of employees: parents, grandparents, siblings, aunts, uncles, nieces, nephews, step-siblings, in-laws, and anyone living in an owner’s household.

How Much Can I Claim?

ERC amounts depend on the year for which you file.

For 2020, you can claim up to $5,000 per employee: 50% of wages paid to each employee and certain healthcare benefit costs with an upper limit of $10,000 per employee.

The Employee Retention Credit 2021 lets you file up to $7,000 quarterly per employee: 70% of wages and certain healthcare benefit costs with a maximum of $10,000 per employee.

Most businesses can only claim the ERC for the first three quarters of 2021. However, the IRS allows only recovery startup businesses and severely financially distressed companies to also claim it during the fourth quarter of 2021.

What If I’m Not Eligible for the ERC?

With the extensive IRS requirements for ERC filings, mistakes are bound to happen. Meanwhile, some companies claiming to be ERC specialists are actively soliciting small businesses. These companies make extraordinary claims that they can help clients successfully qualify for and receive these tax credits. Some are outright scam artists, while others lack the knowledge and experience to prepare accurate, meticulous, and verifiable ERC filings.

These “ERC mills” do more harm than good. The IRS has devoted more staff to detecting improper claims. Moreover, taxpayers may need to pay back credits with penalties and interest if the IRS determines their claims aren’t valid.

KBKG ERC Filing Services

CPAs possess special skills and knowledge of tax forms and returns. They’re concerned with preparing the most accurate filings possible — and so is KBKG. Accountants and other financial professionals trust KBKG for valuable ERC filing services:

  • Assessing your eligibility
  • Identifying qualifying employee wages
  • Calculating credits and accounting for PPP loans
  • Reconciling qualified credits with requested advance credits
  • Preparing data for tax forms
  • Mechanics of the Form 941-X refund claim for ERC require you to split the credit between a non-refundable (941-X, Line 18a) and refundable portion (941-X, Line 26a)

We collect and create supporting documentation so our clients can be sure their ERC filings are correct.

Unmatched Expertise for ERC Tax Credit Claims

The ERC Tax Credit offers many benefits. However, claims filings must follow strict IRS guidelines to be valid.

Why not partner with a tax solutions company trusted by certified public accountants? KBKG delivers world-class turnkey solutions to businesses and CPAs. For expert ERC tax credit services, contact us through our online form or by calling (877) 525-4462, extension 259.

 



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

 

 

Curious to know more about the ERC credit? Contact us today.

 

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