Rancho Mesa's Account Executive of the Surety Department Andy Roberts is joined by Tina Jani, CPA and Partner at Covell, Jani & Pasch LLP, to discuss the Employee Retention Credit.
This podcast is designed to provide general information as to the subject matter covered. Neither the publisher nor the presenter by and through this presentation is rendering legal, accounting, or other professional services. If professional advice is required, you need to contact your tax advisor, the presenter, or the publisher for their services under a separate engagement contract.
TRANSCRIPT
Andy Roberts: Hello everyone and welcome back to StudioOne, our safety and risk management network. I’m Andy Roberts, Account Executive in the Surety Group with Rancho Mesa and joining me is Tina Jani, who is a CPA and Partner at Covell, Jani & Pasch LLP. Today we are going to be talking about the Employee Retention Credit, which is something many contractors remain unaware of. Welcome to the show, Tina.
Tina Jani: Thank you very much for having me. I am very excited to be here!
Andy: As I mentioned the Employee Retention Credit is something a lot of contractors haven’t heard of, but what is the ERC?
Tina: The ERC is an economic recovery program created by the CARES Act – the same legislation that created the Paycheck Protection Program (PPP).
Andy: That’s interesting that it was brought about by the same legislation that provided for the PPP but what brought about the need for the ERC?
Tina: The US government introduced the program to help businesses with employees who got affected either by full/partial shutdown rules or if the gross revenue went down by certain percentage in 2020 and 2021.
Your business may qualify for a stimulus check of up to $26,000 per employee by claiming employee retention tax credits.
Andy: You mentioned percentage. Can you elaborate what are those percentages?
Tina: Yes, absolutely! The key percentages to keep in mind are:
a. For 2020 - 50%
b. And for 2021 - 20%
What that means is you take 2019 as a base year. Then you compare your Quarterly Gross revenue for the year 2020 and 2021 with the same quarter in 2019. If your quarterly gross receipt went down by 50% in any quarter in 2020 or 20% in 2021, you are eligible for the Employee Retention credit for that particular quarter.
Please keep in mind that these are just key points. The actual rules are much more detailed and generous.
Andy: This is all great information. So when did the program start and when did it end?
Tina: The program started on March 13, 2020 and it ended for regular business on September 30, 2021. There are special rules for new businesses started after February 15, 2020 or if you are severely financially distressed employer that makes you eligible for the ERC for the fourth quarter of 2021 as well.
Andy: Does that mean it’s too late to apply for the ERC?
Tina: No, absolutely not. You can go back and amend your payroll tax return which is form 941. The statue runs for three years from the date the original 941 was due. You can still apply for the ERC by filing form 941X. The first statue will for Q1 2020 will run out on April 30, 2023. Businesses still have from 6 months to one and a half year to go back and amend their payroll tax returns and apply for the ERC. However, we highly recommend that businesses pay attention to this credit as soon as possible.
Andy: Do you have to prove that your business was affected by COVID to be eligible for the ERC?
Tina: No, you don’t have to prove that your business was affected by COVID. As long as you show a drop in the gross revenue and that can be because of any reason, your business is eligible for the ERC.
Andy: Can you give me an example of a client that didn’t know about the ERC until you told them and how they benefited?
Tina: It is interesting that almost every business was familiar with the PPP loans but not very many businesses are familiar with the ERC. When we started working on the ERC, we contacted all our clients including our largest client and asked for their gross revenue analysis. We made them aware of the ERC and they were eligible for two quarters, total $2.8m. This is just one example. There are numerous businesses out there who are eligible for the ERC and has not applied yet.
Andy: That was all great information and this sounds like a credit that can have a big influence on a contractor’s financial statement, which as you know, in the world of Surety Bonds is very important because a contractors financials are the driving force behind what they can qualify for when it comes to a bond program. This was a somewhat basic overview of the ERC and how it works and I know it’s more complicated and requires the help of an expert like yourself, so how would you recommend a company owner start the process of determining if they qualify for the ERC?
Tina: ERC is a very generous program that a small business owner should not ignore. The process is very simple and straightforward, especially under gross revenue drop method. Basically, you start with comparing your gross revenue. They should contact their CPA or tax professional to start the discussion I am happy to answer any questions and can be reached at my email address pjani@cjp-cpas.com or my phone 760-737-0700.
Andy: That’s great to hear. Thank you so much for joining me Tina to discuss this very important topic.
Tina: Thank you for having me.
