Frequently Asked Questions
What is the Employee Retention Credit (ERC)?
The Employee Retention Credit under the CARES Act offers monetary support to businesses that kept employees on their payroll during the height of the pandemic. The refundable tax credit is available for both 2020 and 2021 for wages that were paid by an eligible employer whose business has been financially impacted by COVID-19. The full credit amount available is 50% of up to $10,000 in wages per employee for the whole year in 2020 and 70% of up to $10,000 in wages per employee per quarter in 2021.
We did not have a drop in revenue; are we still eligible for the ERC?
You may be! Companies can either qualify due to a drop in gross receipts over a certain threshold
–OR–due to a full or partial suspension in business operations. We have helped many businesses that have been more profitable than ever but still qualified due to impact from government mandates.
A common misconception about the government mandate qualification is that the business must have shut down due to Covid mandates in order to qualify. However, the guidance that the IRS has developed demonstrates that this qualification also includes businesses that had more than a nominal impact to
their business operations due to government orders related to Covid.
Why haven’t I heard about this from my financial advisor?
The ERC has undergone significant changes and updates since it was first introduced in the CARES Act. For any professional not solely focusing on the ERC, it may have been too much to keep up with. There is still significant misunderstanding of the program based on previous versions of the law, and unfortunately, many business owners are disqualifying themselves due to poor guidance or misinformation. Understanding the full intricacies and subsequent guidance of the ERC law is our specialty, and we encourage you to let us take a look to see whether you qualify.
Why should I pick Clarity over some of the other tax consulting companies that handle the ERC?
Clarity’s foundation is based on two guiding principles: client education and an ethical flat-fee structure. These values set us apart because most ERC consulting firms charge a percentage-based fee which is problematic in several ways. Not only does it lead to unconscionable fees for services provided, a percentage-based fee structure also incentivizes the consultant to encourage a much more aggressive claim than may be sensible for your company. Because of this, percentage-based consultants are more likely to engage in predatory behavior and less likely to offer proper and thorough education about the ERC, the IRS guidelines, and the strength of your claim. Clarity’s approach is to offer a free analysis up-front which provides a thorough picture on whether your company is eligible, how strong an argument you have if you’re qualifying under the subjective government order qualification, and what amount of refund you can expect per qualifying quarter.
My business received the PPP, can I still qualify for the employee retention credit (ERC)?
YES. Although the ERC was initially not available to companies that received the PPP, a retroactive amendment was passed in December 2020 that allows companies to be eligible for the ERC even if they received one (or both!) of the PPPs through the SBA. Employers do need to identify the wages paid with the PPP and cannot use those as qualified wages for the ERC. We thoroughly account for any reported PPP funds during our analysis of your company to ensure that IRS guidelines are followed regarding PPP/ERC interactions.