The employee retention credit (ERC), which was created as a result of the passage of the CARES Act, has recently undergone expansions and adjustments. Check to see that you are up to date and that you are making use of the credit. Participate in our on-demand webinar with our ERC subject matter experts.
In order to provide assistance to employers that have been impacted by the COVID-19 epidemic, the CARES Act created the employee retention credit (ERC). In December of 2020, the Consolidated Appropriations Act made certain additions and modifications to it. The provision that Paycheck Protection Program (PPP) loan beneficiaries are granted the ability to retrospectively claim the ERC on eligible costs incurred in 2020 is a significant adjustment. Now is the time for companies to look back at the calendar year 2020 and assess whether or not retroactive credits were available during that time period. The ERC has also undergone major expansion for the year 2021, with the maximum credit going up from $5,000 per employee to ,000 per employee.
In this webinar that you can watch on demand, our ERC specialists will discuss the most important features of the ERC, such as the most recent revisions, the questions that are asked the most frequently, and examples that will help you make full you are getting the most out of the credit.
Goals of instruction include:
- Have a solid understanding of the most important features of the employee retention credit, particularly the changes and expansions brought about by the law that was passed in December.
- Determine whether or not an organization is entitled to get the credit, as well as the method by which qualified wages will be estimated for the years 2020 and 2021.
- Determine the types of situations and instances that will most effectively grant credit to companies.
- Consider the impact that the employee retention credit has on personal income tax returns, payroll tax returns, and applications for PPP debt forgiveness.
In order to provide assistance to employers that have been impacted by the COVID-19 epidemic, the CARES Act created the employee retention credit (ERC). In December of 2020, the Consolidated Appropriations Act allowed for the Environmental Response Commission to undergo additional expansion and modification. The expiration date of the ERC was moved up from December 31, 2021 to September 30, 2021 for the majority of employers as a result of the completion of the Infrastructure Investment and Jobs Act (Infrastructure Act) by Congress on November 5. The Infrastructure Act is expected to be signed by President Biden in the near future. There is still the possibility for companies to claim the ERC retrospectively for calendar quarters that have come and gone in the past.
Our specialists in tax credits are able to guarantee that you are making the most of the ERC’s benefits. We’ll assist you:
- It is necessary to determine probable membership in the aggregated group.
- Conduct a review of qualifications while operations are suspended.
- Determine if there has been a substantial decrease in gross receipts and analyze the data.
- Provide guidance on how to determine if an employee works full time.
- You are required to account for any purchases or sales.
- Formulate a plan for optimizing your expenses that is qualified for the Paycheck Protection Program (PPP) and the ERC.
- Compute the amount of qualifying salaries and costs for health plans.
- You are responsible for computing credit and providing advice on filing logistics.
In terms of doing calculations and providing support. You may rely on us to assist you with:
- Determine if there will be a full or partial halt to activities.
- On a tax basis, you need to compute and support a large drop in gross receipts.
- Place restrictions on the amount of money that may be spent on wages and health plans.
- Determine the extent to which PPP funds and qualifying salaries coincide.
- Conduct a review of the records, and identify employees who are not productive.
- You are responsible for compiling, reviewing, and calculating your retention credit.
- Provide a documentation and calculation package to support the argument.
Facilities that provide long-term care to patients may be eligible for an employee retention credit.
It’s possible that a lot of senior living and long-term care facilities overlooked out on the employee retention credit because of this oversight. There may be opportunities for cost reductions if a government-mandated partial stoppage of operations and the concept of “small employer” are both examined more closely. Here are the steps:
There is a possibility that a large number of senior living and long-term care organizations have overlooked a possible advantage that may be made accessible to them by COVID-19 relief legislation that will be passed in the year 2020. Certain employers that have seen a considerable drop in gross sales or whose operations have suffered as a result of government directives are eligible for the employee retention credit, often known as the ERC. Because it is determined based on the wages given to all employees for a substantial portion of the pandemic period in 2021, the credit can be particularly beneficial for employers who have fewer than 500 full-time employees and who meet one of these conditions.
It’s possible that a considerable number of senior housing and long-term care organizations have done the math and concluded that they won’t pass the gross revenue reduction criteria. However, businesses may also be eligible if they have suffered a loss as a result of a full or partial suspension of activities that was caused by orders issued by the government. In this case, the loss must have had a detrimental impact on the organization’s business. Many also concluded to the realization that, according to the rules, they would not be considered “small employers,” which would render them ineligible for the most advantageous aspects of the credit. In point of fact, if one were to take a closer look at the ownership arrangements of the many facilities that make up a larger company, one may reach the conclusion that the larger group is qualified to be treated as a small employer.
When does an organization officially cease operations?
The rules of the ERC allow for a business to qualify for the program if its activities were placed under a “full or partial suspension” as a direct result of an order issued by the government and the impact was more subject than trivial. Therefore, it is up to the taxpayer to determine which government orders they were subject to, whether compliance with such orders would qualify as a partial suspension in accordance with these rules, and whether the impact that this compliance would have on operations would meet the threshold required to be considered more than nominal.
Nursing homes are one of the businesses that are subject to some of the most stringent regulations in the country. Compliance with some of the regulations that have been issued as a result of the COVID-19 pandemic, such as those that have been issued by the Centers for Medicare and Medicaid Services and by state and local health officials, could have an impact on the business in a way that causes it to meet the requirements of this threshold under the law.
To be clear, organizations who are examining the facts and circumstances in comparison to the eligibility requirements for the ERC should be prepared to meet a high documentation level. Having said that, it seems likely that a large number of senior living and long-term care facilities that automatically disqualified themselves from consideration for this credit due to their inability to meet the gross receipts test could gain something from taking a second look at this alternative criterion and reconsidering their eligibility.
It is ready for organizations that are determining their eligibility for the ERC based on the facts and circumstances to be prepared to meet a stringent documentation standard.
When does an organization become too large to be considered a small employer?
For the purpose of determining eligibility for the 2020 credit, an organization is categorized as a “small employer” if the number of its full-time employees on average is lower than 100. This number will climb to 500 when the credit consideration occurs in 2021. If you are considered a “small employer” in 2020 or 2021, your organization may be eligible for significantly increased ERC benefits. These benefits include a refundable credit on wages paid and health insurance for all employees during the partial suspension period. If you are eligible for these benefits, you must meet all remaining credit criteria.
It’s possible that firms that provide senior housing and long-term care heard the initial rules and concluded that, if they included full-time equivalents, they would have a far higher employee count than required. Nevertheless, there are a few key distinctions that need to be acknowledged. To begin, they are not full-time equivalent employees but rather true full-time workers who put in more than 30 hours each week. Many businesses are able to minimize the total number of employees included in the calculation by excluding part-time workers from the total.
Second, although many of the facilities in this sector operate under a single brand, which may be controlled by ownership groups that share some common ties, the specific ownership structure of each property may be made up of different collections of investors from within the group. This is because many of the facilities in this sector operate as part of a larger conglomerate. It is feasible that the various ownership groups at the various sites might individually qualify as smaller employer “groups” for the purposes of the ERC, so expanding the number of organizations that are eligible in accordance with the rules governing small employers.
Where do we go from here?
After the third quarter of the calendar year 2021, most taxpayers were no longer subject to the ERC. However, taxpayers who were eligible for the credit but did not submit a claim for it can apply retrospectively for a refund from the Internal Revenue Service (IRS) by utilizing an altered payroll tax form to address any errors that may have been made. If you believe that your organization may be eligible for the credit on the basis of the facts that we have stated, please do not hesitate to get in touch with us so that we may explore the specific facts and circumstances of your situation.
Businesses catering to end users: shore up your financial foundation, bolster your operations, and improve your consumer culture.
During the past few months, many companies that are focused on customers have seen a time of increased stability; nonetheless, maintaining vigilance will be very essential during the next 12 to 18 months. Consider taking one or more of the five actions outlined below to build resilience and reduce risk.
After experiencing a time of better stability over the course of the previous several months, numerous companies whose primary emphasis is on customers may now let out a sigh of relief. This is especially true for consumer businesses that participated in incentive programs such as the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC). It is also true for consumer businesses that closely monitored their cash flow, maintained their core management team, and communicated frequently with their customers, employees, and suppliers. The trend toward greater consistency has been quite positive. However, maintaining vigilance is absolutely necessary regardless of the effect that COVID-19-related shutdowns and other interruptions have had on your business over the last 18 months, whether those effects have been favorable or bad.
Companies with a primary emphasis on customers will want to ensure that they are in a robust position from a financial, operational, and cultural standpoint so that they are prepared to meet any new difficulties that may develop in the next 12 to 18 months. Consider taking one or more of the following five actions to strengthen your organization’s resilience and reduce risks, whether it be as a result of the pandemic, disruptions in the supply chain, or other sorts of business interruptions.
1. Address talent management, acquisition, and retention
The competition for qualified workers is, by far, the most difficult obstacle to overcome in all areas of business. Companies with a focus on the customer that achieve the greatest levels of success in this industry are those who employ a variety of strategies for attracting, retaining, and motivating employees and have the overarching goal of developing a culture of world-class excellence.
Is everyone on your staff looking forward to starting each day at work? Do you provide them with chances for professional growth and training to assist them in achieving their career goals? (Are you familiar with their professional goals?) How does your business differentiate itself from the numerous others that are also looking for competent and dependable employees? What benefits does it offer? Right now is the time to “be creative” with the benefits and programs that you are providing to your present workforce as well as those who may join your staff in the future. Things that set you apart from the competition and help you hire and keep the top talent you’re looking for, such as flexible workdays and time off, athletic reimbursement for health and fitness memberships or equipment, or stipends and reimbursement programs for childcare, can help you hire and keep the top talent you’re looking for.
Do you contribute to the coherent performance of the leaders on your management team? In the equation for talent retention, role alignment is sometimes overlooked as an important factor. Are you aware of the warning signals of misalignment that might be having a detrimental effect on your business and the service that it provides to its clients and customers?
2. Keep an eye out for any changes to the tax code and check your eligibility for the ERC tax credit
Recent actions taken in Congress, including the approval of a bicameral funding plan for infrastructure and the consideration of the Build Back Better Act, have paved the way for more tax reforms to be enacted. Although the particulars are unclear at the moment, we believe that high-income earners and business owners may face potential increases in their tax responsibilities in the years to come. In addition to newly enacted legislation, some tax changes have recently been operational as a result of actions made by Congress in the past.
In the midst of the epidemic, many companies with a focus on consumers were able to keep their operations running with assistance from the ERC tax credit, which has had a significant impact on the financial flow of these businesses. The Internal Revenue Service (IRS) has recently provided guidance on ERC questions that a large number of consumer-focused businesses had been asking about the inclusion of COVID-19 relief funds in gross receipts and the treatment of tips when calculating qualified wages. These questions related to how to account for COVID-19 relief funds in gross receipts.
At this time, we are making the startling discovery that a significant number of consumer-focused enterprises who previously did not feel they qualified for the ERC do, in fact, qualify. Our group has uncovered a great deal of overlooked chances for customers, many of which are of substantial importance.
We are making the startling discovery that a great number of consumer-focused firms who previously didn’t feel they qualified for the ERC do, in fact, qualify for the program.
We strongly suggest that consumer enterprises investigate the ERC tax credit as soon as possible. To qualify for the credit, employers can go as far back as the year 2020 or as far forward as the first three quarters of 2021. Because of the pressing nature of the situation, the ERC benefit will no longer be available after the fourth quarter of 2021.
The Work Opportunity Tax Credit, which has just had its deadline extended until the end of 2025, is another opportunity to save tax on taxes that is sometimes overlooked.
3. Evaluate the existing financial plans and make sure there is sufficient resources.
You should review your cash-flow estimates for periods of 16 weeks and longer while you are considering how the ERC tax credit and other incentives may affect your cash flow. Make certain that any new support from these programs is taken into consideration. Next, put your estimates through some rigorous testing. When estimating operations, it is important to think about various possible outcomes, including the best, the worst, and the most likely.
Make sure that you have enough space available on all of your credit lines and other credit facilities. Make sure that you have a complete understanding of the computations, effective dates, and the repercussions of violating the covenants, especially if you have recently received funding from the Main Street Lending Program, refinanced debt, or had covenants restated. Talk to your creditors now to avoid unpleasant surprises at the end of the year.
4. Evaluate your cyber defenses, make sure you are in compliance with PCI, and examine your IT infrastructure.
The creative capacity of hackers continues to advance, leading to breaches that are increasingly sophisticated. Is the data of your business secure? Ensure that you are in compliance with PCI. If you’ve changed your existing programs or introduced new functions or platforms, have you considered the possibility of introducing new vulnerabilities? Consumer firms have been forced to respond rapidly to shifting conditions in order to maintain operations, and it’s possible that compliance standards have been compromised for many of them as a result of the move toward online buying and remote employment during the epidemic. Now is also a good time to think about taking a step back and evaluating the technology strategy, requirements, and resources with a longer-term view.
5. Make your operations more stable and focus on innovation
Remember what has made your business successful in the past so that you can navigate the waters of change successfully. Use data to examine recent trends. Maintain a careful eye on your key performance indicators (KPIs) to assist you in understanding what “normal operations” entail now and to assist you in anticipating the changing demands of your customers in the future. Keeping up with these shifts might be difficult, but staying on top of them is more vital than ever. The same characteristics that created to a solid foundation before the epidemic are now essential: Keep your attention focused on your staff, your customers, and your profitability.
The same principles that created to a solid foundation before to the pandemic are still essential: You must keep your staff on your customers, your employees, and your profitability.
In reaction to the COVID-19 epidemic, firms with direct customer interaction shown extraordinary ingenuity. Going forward, your ability to be creative and innovative will assist set you apart from competition in light of the continuously shifting purchasing patterns of consumers. What additional possibilities are there that you can think of? What has worked well in other places that you could adapt for your own use? I am interested in purchasing your product or service. Do you provide any other or extra delivery options? New markets that you might be able to serve? Continue to think of new things to question, and don’t let the creative process die out.
Despite the fact that consumer-focused firms have had a sense of stability in recent months, threats still exist. In order to better withstand any future shocks, whether they come in the shape of financial, operational, or cultural issues, you should strengthen your positions now on these fronts.