What is the Employee Retention Tax Credit?
Why KBKG is the Trusted Partner Your Business Needs
Thought Leadership by KBKG
The Cares Act Employee Retention Tax Credit has provided relief for many businesses impacted financially by COVID-19, but implementation has been a challenge. There has been an influx of fraudulent ERC “mills” that market themselves to businesses as ERC tax credit specialists, leading these businesses to claim the credit when they do not qualify. You must work with a trusted and established tax services provider, such as KBKG, to determine if and how the credit applies to your business.
About the Employee Retention Credit
The ERC (or ERTC) is a federal program that encourages business owners to keep their employees on the job. The Employee Retention Credit provides businesses with a tax credit. This credit is a percentage of the qualified wages they paid to employees.
The ERC tax credit has changed several times since its implementation, requiring certified public accountants and other tax professionals to be rigorous in following the changes. The modifications have created confusion for many businesses. This has created opportunities for dishonest or predatory brokers looking to take advantage of a confused populace.
Avoid Employee Retention Credit Mills
According to Martha Waggoner in Journal of Accountancy in her latest piece, “New process provided for anonymous reporting of ERC mills”
It is a move that the AICPA supports, as it has expressed its concerns about “the unscrupulous business practices of ERC mills” for over a year, said AICPA President and CEO Barry Melancon, CPA, CGMA.
“This credit has been hugely beneficial to countless businesses that struggled to navigate the challenges brought on by the pandemic, and CPAs have often advised clients and business owners against taking the improper recommendations of these third-party vendors,” Melancon said. “We are pleased that employers and others now have a mechanism to anonymously report bad actors and help to protect the public against them.”
What To Look For in a Tax Consultant
Due to the complexity of tax law, the frequently changing guidelines on tax credits such as the Employee Retention Credit, and the growth of fraudulent tax credit companies giving incorrect guidance, choosing reputable tax professionals is now more important than ever. Give your business to an established professional with impeccable values.
Tax professionals should have a verifiable reputation based on their integrity. Bad actors may provide inaccurate information about whether you qualify for the ERC for their own personal gain. Instead, guidance on the ERC tax credit should be based on an up-to-date understanding of all modifications to the ERC as well as on the most current IRS recommendations on this tax credit.
A desire to obtain or retain client participation should never influence reputable tax professionals. Their focus must always be on adhering to tax law and discovering the legal avenues available to clients in the application of the ERC and other tax credits.
Your team of experienced and highly trained professionals should have a granular understanding of the intricacies of the ERC. They will assist you in determining if your business qualifies for ERC and for which quarters it qualifies. They will help you calculate the value of the credits and how other programs, such as the Paycheck Protection Program, will impact your eligibility.
While all tax professionals want to help certified public accountants and businesses benefit from all appropriate tax savings available to them, they should never lead their clients to claim credits that the clients do not qualify for. Look for a commitment to providing accurate guidance to clients about the ERC tax credit and all other tax issues.
Reputable consultants will always safeguard your sensitive personal, business and financial information. The confidentiality of your information should be their highest priority.
Increased Scrutiny of the ERC Tax Credit
Fraud and abuse of the ERC tax credit have become a top concern of the IRS. It is more important than ever that certified public accountants and businesses ensure that they apply for this credit appropriately.
The IRS is aggressive in its pursuit of taxpayers using the Employee Retention Credit inaccurately as well as its pursuit of fraudulent vendors that are targeting businesses on this topic. Businesses should work with tax professionals that are highly knowledgeable about the ERC and how to mitigate misuse of the credit.
Guidance from KBKG on the ERC Tax Credit
You need to partner with an experienced company with a reputation for integrity and truthfulness. KBKG has over 20 years of experience guiding clients through complex tax issues. Our tax professionals stay abreast of all modifications to the ERC tax credit to ensure that our clients receive all the tax benefits they are eligible for, especially when it comes to claim the ERC. KBKG has offices nationwide and headquartered in Pasadena, California.
What We Do at KBKG
Here at KBKG, we understand that all individuals, companies, and accounting systems are different. We are a client-centric firm with a primary objective of delivering value to those that we serve. We offer a wide range of services that cater to your specific needs and interests. Let’s start a conversation and see what we can do together.
Are you looking to learn more about the ERC credit? Is your business based in a state like California, New York or Texas — states that were severely impacted by government shutdowns, we look forward to hearing from you. Contact us today for help with the ERC and other important credits.
A Summary of the ERC
- 50% credit on $10,000 of qualifying wages and certain healthcare benefit costs per employee paid March 13, 2020 to December 31, 2020. ($5,000 max per employee in 2020)
- 70% credit on $10,000 of qualifying wages and certain healthcare benefit costs for each quarter from January 1, 2021 to September 30, 2021.
- $7,000 max claim per employee per quarter in 2021.
- Recovery Startup Businesses can qualify for Q3 and Q4 2021, the credit is capped at $50,000 per quarter.