Featured expert Matt Evans goes in depth about the under-used program
You may have heard of the Employee Retention Tax Credit (ERC), but NFIB research shows many owners have not yet used the program. To help NFIB members make the most of available pandemic-recovery funds at a time when every penny counts, our latest webinar hosted a CPA and featured expert who workshopped the ins and outs of the ERC.
During the webinar, NFIB Research Center Executive Director Holly Wade and featured expert Matt Evans, CPA, SMA, CFM, explain the ERC in detail. “I felt compelled to get involved with this because I wanted to make sure small business owners knew about it, and I didn’t feel like it was getting the attention it deserved,” Matt said. He also encourages webinar attendees to talk directly to a CPA or tax attorney for details about their specific situation.
But what is the ERC? Simply put, it’s credit that eligible employers can claim by reducing their federal payroll taxes. It isn’t taxable income; it simply reduces the amount you owe in taxes. The ERC is applicable to Quarters 2, 3, and 4 of 2020 and all four quarters of 2021.
“When you apply the ERC, you have to remember that the IRS is giving you, the employer, credit for paying all those taxes,” Matt told the attendees. “All you have to do is wipe it off. We CPA’s love tax credits because it’s the most potent way to reduce taxes, and it’s done directly when you submit the tax return.”
- The maximum size of the credit is up to $5,000 per employee for all of 2020 (50% of up to $10,000 paid in employment taxes), and up to $7,000 per employee, per quarter for 2021 (70% of up to $10,000 paid in employment taxes).
- There are two ways to qualify for the ERC: firstly, if your business was subject to a partial or full shutdown mandate, or if your business experienced a drop in gross receipts of at least 50% (in 2020) or 20% (in 2021) compared to the same quarter in 2019.
“Every quarter in 2021, you should be comparing your gross receipts,” Matt advised. “On the first week of every quarter, your bookkeeper should check your gross receipts – sales, taxable income, all of that – and compare it to 2019. Did you meet the 20% gross receipt reduction? If yes, then take advantage of the ERC.”
“Anyone who’s not sure about shutdowns should print out IRS Notice 2021-20. Why? Because the IRS has some very liberal examples of what can constitute a shutdown. A very good document to have – it’s defensible in a court of law, and CPA’s will hang their hat on it.”
Matt also goes into the other caveats: for example, the number of employees also impacts eligibility for the ERC. Next, Matt offers a step-by-step guide for how to claim the ERC, how it interacts with similar recovery programs like PPP loans, the situations when an employee’s wages are not eligible for the ERC, and much more. The final 15 minutes of the webinar provides live answers to audience questions.
The webinar also includes a brief presentation from Holly Wade on the Economic Injury Disaster Loan (EIDL) and grant program.