ERC: Is It Too Good To Be True?
Let’s talk a little ERC factor fiction. ERC stands for Employee Retention Credit. These started back in the covid days to give credit to keep employees on the payroll. Now, there’s a lot of confusion in the media recently because a lot of companies have come out to consult with business owners and are telling them that they can receive a lot of money from the IRS and they can help them.
Now, many of these companies are one shot deals who are just coming out of the woodwork to talk to you about ERC. We’ve already done some previous information about ERC scams, whether they’re for real, whether it can happen, but let’s revisit why you get the ERC. It’s not as simple as most of the advertising these days is saying, it’s not just based on your business. You have to have suffered some losses during covid.
Why You Get the ERC
So couple of the rules here, you had to be, your gross receipts for 2020 had to be down more than 50% from the prior period at that same time. Or if it was 2021, you had to be down more than 20%. So you do have to meet qualifications to get the employee retention credit.
Many of the ads that are out there now, and many of the emails you may be receiving telling you that you could get this money from the IRS, don’t specify anything about this. Your indicator light should come on, that something might be wrong if somebody is telling you that you qualify for free money from the government with no strings attached. You must meet qualifications to get this money.
Next up, if you did not have that revenue decline, can you still qualify? Maybe, your business had to be closed based on a government order. That’s kind of the other area where the ERC can step in even if you didn’t have a revenue decline.
So many restaurants come into play here, or maybe they were forced to close their interior dining rooms, but they still had a lot of sales going on through, uh, delivery services. There is a possibility they may still qualify for the ERC.
We Helped our Clients Take Advantage of the Program
However, the main thing I want to make sure that you understand is that when you receive advertisements about ERC, first off, many people have asked me and my clients, Hey, can I do this? Can I really get this money? We’ve already applied and you’ve already got the money for the ERC.
If you were my client, we did that right as that program was coming out, not two years later, after the fact. You needed it in 2020 and 2021, and that’s when we helped our clients take advantage of that program.
If your accountant did not assist you with that, yes, you may qualify, but make sure that somebody is walking you through the tests of what your revenue was and showing and proving that you had those declines before telling you, you qualify for this money.
I have also run across several cases where people said, my accountant never even mentioned anything about it, and I even asked about it now, and they still don’t know. Well, maybe you still do qualify.
What You Should Do
However, your first move should be to look around for a new accountant. That’s what your accountant should be helping you do. Navigate tax laws, navigate government programs like this that relate to your taxes and helping you qualify. So you may win on two fronts. You may have ERC money and you may win by looking at a new accounting relationship.
So I hope this helps you navigate the waters. I will also post a link in our show notes here to tell you a document that links directly to what the qualifications are and how you should navigate the ERC fact or fiction characteristics.
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Donna Bordeaux, CPA with Campground Accounting
What happens when you send two CPA’s out into the relaxing outdoors to camp? You get CampgroundAccounting.com. Donna and Chad have over 50 years of combined experience as entrepreneurial CPA’s. They’ve owned businesses and helped business owners exceed their wildest dreams. They camp and travel across the country every chance they get, so it’s just a natural fit that they focus their CPA skills on helping campground owners throughout the USA grow their businesses and minimize the impact of taxes. They understand the key performance indicators and specialized issues that face RV park owners every day.