Recorded live on February 10th at 1 PM EST
Unpacking the Employee Retention Credit: Funding for Businesses Impacted by COVID
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MP: Good afternoon, and thank you for joining us for an MP webinar covering employee retention credit funding for businesses impacted by coven i’m katie crater marketing specialist here at MP.
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MP: For those of you joining us on a webinar for the first time MP, is a full service human capital management company.
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MP: We offer a complete suite of products and services to support organization through the entire employee lifecycle including recruiting HR payroll.
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MP: Benefits administration time and attendance and compliance assistance we support our clients with cutting edge technical solutions, as well as proactive reliable service and deep HR and payroll expertise.
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MP: At MP, we are wired for HR and help our clients succeed by aligning their people strategy with their business goals.
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MP: i’m excited to introduce your presenter for today, Paul corrals.
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MP: ball has over a decade of experience and HR consulting space where human businesses of all sizes and industries, Paul and his team have certified HR professionals at MP.
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MP: assist clients with training compliance and full circle HR guidance and support.
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MP: Just a few housekeeping issues before we get started here today, if you would like to submit a question during the program please use the Q amp a feature at the bottom of the screen.
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MP: We will be sending out the recording of the webinar later today, along with the slides and with that i’m going to hand the MIC off to Paul.
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Paul Carelis: Thanks so much caitlin welcome everyone if this is your first time to one of our webinars we sincerely welcome you, if it isn’t.
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Paul Carelis: We welcome you back.
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Paul Carelis: really looking forward to digging into today’s topic it’s one we’ve we’ve covered before but.
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Paul Carelis: You know, we find more and more that businesses are realizing that they may be eligible for employee retention tax credits it’s something that was largely ignored for a while and rightfully so we’ll talk about that, but.
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Paul Carelis: It is something if you are part of a business that you want to make sure you’re up to speed on because you could potentially be leaving lots of dollars on the table, if you don’t don’t explore your eligibility.
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Paul Carelis: So, in terms of what will cover today is we’ll discuss eligibility help determine whether or not your business may be eligible.
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Paul Carelis: The rules for eligibility do differ.
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Paul Carelis: Between 2020 and 2021 so we’ll go over those key differences we’ll go over some definitions, so that we’re all speaking the same language when it comes to these credits.
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Paul Carelis: will talk about some of the irs guidance that’s come out over the last several months and let’s help clarify some some of the Gray areas we are encountering early on, with the Program.
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Paul Carelis: will go over some Frequently Asked Questions law review some scenarios that we run into over the last year and change that we’ve been doing this work.
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Paul Carelis: As well as some key facts and figures and then also open it up to your questions so as caitlyn mentioned, please do feel free to use the Q amp a feature in zoom For those of you.
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Paul Carelis: who sent some questions ahead of time at registration those did get forwarded to me, we had over a dozen questions beforehand so i’ll make sure to get to those as well, I do have those here.
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Paul Carelis: But really looking to dig in, and please don’t hesitate to add new questions as well.
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Paul Carelis: Alright, so in terms of the history where did this all come from, why are we talking about it, and why are we talking about it now in 2022.
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Paul Carelis: The employee retention tax credit or er TC or ERC depending on on who’s.
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Paul Carelis: who’s saying it was born out of the original stimulus bill back in I believe April of 2020.
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Paul Carelis: That being said, most businesses did not take advantage of it at that time, because in the original stimulus bill they created two programs employee retention tax credits and paycheck protection program loans.
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Paul Carelis: And the original original bill stated that businesses had to choose one or the other, you either did a PPP loan or you did the rtc you couldn’t couldn’t do both so with That being said, most businesses went with the PPP are you able to get some much needed funding support their businesses.
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Paul Carelis: Great Program.
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Paul Carelis: As well as the the second drop program in 2021.
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Paul Carelis: Also at that time the rtc was only available for calendar year 2020 and capped out at $5,000 in tax credits per employee.
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Paul Carelis: Fast forward to December of 2020 and the second stimulus bill that was passed this one really flipped this whole program on its head So the first thing that it did was eliminated that this qualification for pvp borrowers so.
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Paul Carelis: As was kicking off businesses now had the opportunity to take advantage of both so they could do the.
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Paul Carelis: Having that first PPP loan did not disqualify them, they could still go for a second draft PPP loan and still work around those time period, then the payroll costs being paid with pvp funds.
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Paul Carelis: working around those those dollars and those timelines to still also claim employee retention credits.
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Paul Carelis: It also created a program for 2021 and a more generous program as well, so generous in the sense that it was a separate program for each quarter of 2021.
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Paul Carelis: And also provided a higher credit amount so we’ll do a bit of a comparison in a second but from a high level the 2020 ERC program provided up to $5,000 per employee the.
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Paul Carelis: program provides up to $7,000 per employee per quarter, and this is good, through the first three quarters of 2021 So if you combine 2020 and 2021 you could have a potential maximum retention credit come your way of $26,000 per employee.
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Paul Carelis: They also changed the rules for eligibility at the time of the second stimulus bill for the 2021 program so the 2020 eligibility rules remain the same, the program had a new set of rules.
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Paul Carelis: And i’ll discuss those in a second.
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Paul Carelis: And then, finally, the American rescue plan, which was passed last year and middle of 2021.
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Paul Carelis: added some additional quarters to etc, so the second stimulus bill brought it into 2021 four quarters one and two arpa created the program and quarters, three and four.
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Paul Carelis: There, the recent infrastructure bill did remove quarter for so as of as of this time quarter for is not an eligible period for claiming employee retention credits.
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Paul Carelis: They did also create some new categories for eligibility, so the first of which is severely distressed business.
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Paul Carelis: Those are are very few and far between luckily it’s usually as a result of revenues continuing to be 90% or more down when compared to 2019 so it has to be a business that was really continued to be hard hit.
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Paul Carelis: to qualify for that, on the other hand, a lot of businesses have been able to qualify as recovery startup businesses, so this is kind of a separate.
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Paul Carelis: er TC program open to businesses who started February 15 of 2020 or later, so they can have been in business before then, and who have $1 million or less than the annualized gross receipts.
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Paul Carelis: Those businesses and just four quarters three and quarter for So this is the one program that is opening quarter for of last year.
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Paul Carelis: They can get the rtc of up to $50,000 for their business and they don’t have to meet some of the other eligibility guidelines that that we just discussed so if you are a business, who is new as a February of 2020 we’d be happy to discuss discuss that with you offline.
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Paul Carelis: One thing that also came about as part of the arpa when it came to these credits okay arrest as you’ve probably heard is.
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Paul Carelis: Is kind of in a crisis mode they’re inundated they’ve got millions of returns in backlog so really with this credit program largely what what they’re doing or at least what we’ve seen is there.
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Paul Carelis: There it’s taken a while, for them to process, but they are pretty much processing, all of them and sending out the credits, but they are reserving the right to to review an audit them.
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Paul Carelis: And through arpa they bought themselves basically a five year window for them to be able to review.
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Paul Carelis: The returns and determine whether or not a business was truly eligible for ERC so you do want to make sure that you are being cautious and compliant and ethical with with your claims, because you will have have a five year window where where they can inspect that.
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Paul Carelis: Are but also clarified some of the other restrictions, besides PPP loans, where you have to navigate around when it comes to claiming your credits, so, in addition to PPP again it’s not a complete this qualifier you just have to make sure you’re not double dipping at any given time.
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Paul Carelis: But you also have to factor in restaurant revitalization grant funds as well as shuttered venue grants and any of the coded federal covert FM la money that you may have received when people were out sick or quarantining or receiving vaccination.
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Paul Carelis: In terms of irs guide and so when this first really got big so early 2021 when people realized hey I can take advantage of this now, even though I.
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Paul Carelis: Have or had a PPP loan, there was a lot of Gray area that the original bill that introduced etc wasn’t wasn’t too rich with details in terms of some of the questions that were coming up for businesses.
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Paul Carelis: Trying to determine whether or not they qualified what time periods, they qualified for or even how to go about claiming the credit.
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Paul Carelis: So the irs has done a pretty good job of releasing guidance releasing some Frequently Asked Questions even entertaining some scenarios, to give us a better handle on you know when someone may or may not be eligible for credits.
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Paul Carelis: So the first of which was, you know, there was kind of this vague definition hey you qualify if you had a decline in gross receipts which we’ll talk about in a moment.
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Paul Carelis: Or if your business was fully or partially suspended due to coven 19 regulation so.
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Paul Carelis: There were tons and tons of questions what qualifies as a suspension was a they need to be forced close where where was it a scenario where I had to have the doors locked and not be able to allow the public in to any extent very few businesses would qualify, in that sense.
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Paul Carelis: Fortunately they they clarified that that is not the case, really, the the measure of especially a partial suspension of operations.
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Paul Carelis: As to do when there is a a coven related restriction in place and that restriction suspended or altered a function of your business and the amount that it needed to.
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Paul Carelis: To kind of suspend or affect the business goes by this 10% rule, so, if you look back at your.
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Paul Carelis: revenues, whatever the piece was that was affected or suspended would have had to either make up 10% of the revenues of the business.
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Paul Carelis: or 10% of the hours worked should have been at that time dedicated to whatever this function is so the cleanest example, or the most universal example I can think of, is what the restaurant so.
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Paul Carelis: In most cases they were allowed to continue to have takeout and delivery some places could even have the dining room open with with certain capacity, but just about every restaurant that did have done in service was restricted in the sense that.
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Paul Carelis: It depends on the State, as well as the timeframe, but you know they may have been able to have 25% of their normal capacity for dine in or 50% or 75%.
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Paul Carelis: Provided and assuming that the dine in piece of the business accounted for more than 10% of their revenues or 10% of their staffing that would qualify as a partial suspension of operations.
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Paul Carelis: So that’s just one example we’ll go into some others later on this afternoon.
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Paul Carelis: is also did kind of clarify how to go about claiming the credits and how the money is going to come in so it’s all.
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Paul Carelis: It is a refundable credit it’s all based on on payroll tax and form 941 that’s filed quarterly.
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Paul Carelis: So the way that businesses clean this credit, especially at this point, since all the quarters that were eligible have now passed would be.
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Paul Carelis: filing a 941 X, which is an amendment to the original 941 that you are your most likely your payroll provider filed, on your behalf for the relevant quarter.
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Paul Carelis: So, unfortunately, the irs does not have a mechanism for electronically filing 941 axis, so these do have to be done on paper and, similarly, once the credit is issued, that those are being mailed in the form of a paper check to the business, so you do want to make sure that.
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Paul Carelis: In terms of your records with the irs that your address is up to date, because there have been instances where.
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Paul Carelis: A business has had an outdated address on their tax returns and the irs has issued the check and send us the wrong place, and it seems like these are not being forwarded to new addresses so.
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Paul Carelis: They get rejected sent back to the irs and then they just kind of sit on it until they hear from someone to correct the address.
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Paul Carelis: irs has also similarly qualify clarified.
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Paul Carelis: owner eligibility, so the general rule and the golden rule is if there are any 51% or greater shareholders of a business.
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Paul Carelis: And if people are related you kind of add up their their percentages together, but if you have an owner or related owners who are 51% or more ownership stake in business.
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Paul Carelis: they’re excluded in terms of their wages from claiming credit and their family members are also excluded for the credit.
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Paul Carelis: aggregation rules are also important if someone owns multiple businesses so if you are a control group, you do have to aggregate.
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Paul Carelis: The business for for in a few different ways, some some may hurt eligibility some may help it, so the aggregation rules apply to gross receipts.
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Paul Carelis: So when you’re figuring out whether you had a decline if you’re part of a controlled ownership group, you have to kind of combine all the receipts across the businesses.
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Paul Carelis: You do also have to aggregate employee count and full time employee accounts so in determining the size of your business for this program you do need to aggregate all the employees across all the entities.
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Paul Carelis: And then, finally, and what can sometimes be beneficial is you can aggregate when it comes to restrictions that same 10% rule applies but.
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Paul Carelis: In an instance where maybe you had three different fed ids all with the same owner.
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Paul Carelis: let’s just assume they all did the same level of business, if one of those businesses was subject to restrictions and the other two weren’t because that one business did account for more than 10% of the total revenues or total staffing.
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Paul Carelis: All three entities, would be able to use the aggregation rules and all three entities, would be able to clean credits on on all their employees, so it can it can help, as well as.
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Paul Carelis: Potentially hurt hurt eligibility.
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Paul Carelis: They did also do some clarification in terms of governmental orders and what counts, when it comes to restrictions, so it can simply be.
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Paul Carelis: You know, a governor or an attorney general kind of sharing their opinions or their thoughts and a press conference, it has to be some kind of formal declaration that something is being restricted.
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Paul Carelis: That there’s a limitation or formal limitation in some way.
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Paul Carelis: alright.
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Paul Carelis: So, as I said, there are, there are two pathways that a business can be eligible for the employee retention credits, so the first of which is that full or partial suspension that we talked about, and this is all.
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Paul Carelis: kind of measured on a quarter by quarter basis when it when it comes to the restrictions that you do kind of have to know what the restriction is.
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Paul Carelis: So you kind of have your your paper trail and your your evidence for why you’re eligible and and the time period for that restriction so.
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Paul Carelis: You know today i’m sitting in Massachusetts and here a lot of most of the restrictions were lifted as of may 29 so in those scenarios when we’re working with a business that’s located in Massachusetts, for instance.
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Paul Carelis: let’s say they were a restaurant once all those restrictions were lifted on may 29 unless they qualify under the gross receipts decline that’s when the eligibility would stop it wouldn’t extend to the full.
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Paul Carelis: The full second quarter the eligibility would end may 29 and they wouldn’t be able to claim credit for wages paid after that date.
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Paul Carelis: The other avenue for eligibility is a declining gross receipts so when you’re determining whether or not there was a decline you’re always comparing against.
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Paul Carelis: Whether we’re talking about 2020 or 2021 ERC you’re always comparing against 2019 that’s your your measuring stick.
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Paul Carelis: So for the receipts decline if we’re talking about the program there needs to in in quarter by quarter.
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Paul Carelis: You need to show a 50% or greater decline and gross receipts compared to that same quarter in 2019 if you are eligible again that the gross receipts declined does extend for an entire quarter and then some which we’ll talk about in a second.
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Paul Carelis: Some other key differences when we’re talking about receipts decline is that for the program again compared against.
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Paul Carelis: You only need to show a 20% decline in gross receipts quarter by quarter so much easier barter REACH, in many cases.
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Paul Carelis: Another really important note as you’ll see at the top of this graph here is that, in terms of eligibility.
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Paul Carelis: The definition is quite different from 2022 2021 so much like gross receipts you want to always use as your as your reference point and this comes into play for this term running whether or not you’re a large employer as well.
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Paul Carelis: So what you want to look at is actually your full time employee count employees who worked 30 or more hours per week, and what that average was month by month for the calendar year 2019.
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Paul Carelis: that’s going to be your magic number for the size of your business, regardless of what happened during 2020 and 2021 your size is determined by your full time employee come in 2019 this isn’t like the affordable care act, we have to count full time equivalents So if you say had.
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Paul Carelis: 50 employees who worked 30 hours per week and then you had.
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Paul Carelis: 50 employees who work 15 hours per week you don’t have to count those 15 hour per week employees at all there’s no equivalency there.
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Paul Carelis: You can still claim credits on their on their hours, but in terms of determining size, you only have to count full time employee, so in that scenario their size, would be 50 full time employees.
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Paul Carelis: And, whatever that number ends up being for your 2020 2019 count will determine your size so for 2020 to be fully eligible for employee retention credits.
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Paul Carelis: provided you meet the other eligibility guidelines you’d need to be at under 100 full time employees in 2019.
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Paul Carelis: To be eligible and 2021 you just have to be under 500 full time employees in 2019.
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Paul Carelis: So big difference there, and if you are determined to be a large employer so meaning over those numbers that you see here the restriction is that.
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Paul Carelis: You can’t claim credits on all the hours that are worked by your workers, you would only be eligible to claim credits on.
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Paul Carelis: Wages that you paid to people who are not performing work, so this comes into play more into 2020 when there are sometimes furloughs and things like that.
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Paul Carelis: So, if someone is determined large let’s say they had 200 full time employees if they did some furloughs and either paid some people some some wages during that for a long time.
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Paul Carelis: or kept them on the health insurance plan, the group health plan the payments that they made towards the group health plan.
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Paul Carelis: Could that could potentially be eligible for employee retention credits and then they could explore 2021 where things would really open up for them, provided they were under 500 employees, they then all the wages would potentially be eligible.
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Paul Carelis: you’ll see a note about the proceeding quarter rule, so this comes into play for the program so when you’re looking for that 20% or greater decline and gross receipts compared to.
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Paul Carelis: To be eligible for a quarter that quarter that you’re trying to be eligible for or the immediately preceding quarter, need to show that 20% decline in gross receipts.
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Paul Carelis: So what I mean by that is if you’re looking to be eligible for quarter one of 2021 you need to show that either quarter one of 2021 was a 20% drop against quarter one of 2019.
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Paul Carelis: Or that quarter for of was at least a 20% drop against quarter for of 2019 so and that extends on so for quarter to eligibility, you can either look at q2 or q1 and for a quarter 320 21 eligibility, you can either look for a decline in quarter three or quarter two.
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Paul Carelis: And what we found in many cases that businesses were still under restriction, they were still facing declines and quarter to.
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Paul Carelis: Have 2021 but then once restrictions were lifted in quarter three they did not have that decline, but because they can lean on q2 as long as their quarter to was down 20% of more they’re automatically eligible for all of quarter three.
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Paul Carelis: So some some key definitions we just want to be clear on before we move ahead.
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Paul Carelis: The eligible wage period that you could potentially claim credits for for any course that were eligible would be from March 13 until September 30 of 2021 so march 13 2020 through September 30 of 2021.
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Paul Carelis: Qualified wages is.
00:25:01.410 –> 00:25:05.340
Paul Carelis: Pretty open ended in terms of you can count salaries commission’s tips.
00:25:06.750 –> 00:25:12.450
Paul Carelis: Really any similar compensation compensation that subject to fica tax, social security and medicare.
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Paul Carelis: Now, when you’re turning or determining your decline and gross receipts you kind of have to include everything total sales.
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Paul Carelis: Any amounts received for services interests dividends rents royalties annuities grants donations for nonprofits especially all that stuff goes into the factor for determining gross receipts.
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Paul Carelis: So for 2021 we talked about the.
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Paul Carelis: The proceeding quarter rule works, a little bit differently for 2020 you’re looking at the actual quarter and again needing to show a 50% or greater decline, but once you have a quarter that qualifies under that definition you continue to be eligible in subsequent quarters in 2020.
00:26:02.820 –> 00:26:11.070
Paul Carelis: Until you have a quarter, where the decline was less than 20% is still be eligible in that quarter, but the following quarter would win lose intelligibility.
00:26:12.300 –> 00:26:15.390
Paul Carelis: So what I mean by that is in this example let’s say this business.
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Paul Carelis: Had a 52% decline in q2 of 2020 so they qualify for q2.
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Paul Carelis: But then in q3 there you know things shot up, they were only down 17% in q3 under the rules for 2020 they would still be eligible in that quarter it’s just the quarter following that so in this instance Q4 would not be eligible.
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Paul Carelis: Alright, so i’ll take a quick look at the questions before we enter the faqs.
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Paul Carelis: Okay question does our payroll company file form 941 do we receive a check from the irs or our payroll company, let us know if we are eligible for the credit, and we need to apply by ourselves.
00:27:10.800 –> 00:27:21.720
Paul Carelis: Good question so if you use a payroll company and they’re submitting and filing your taxes for you and issuing your w tues and all that fun stuff, then yes, they are, they are filing the 941.
00:27:23.190 –> 00:27:31.530
Paul Carelis: Because of all the various because of the pathways to eligibility your payroll company wouldn’t necessarily know on their own, whether or not you’re eligible for the credits.
00:27:31.830 –> 00:27:39.960
Paul Carelis: They don’t know your gross receipts information they don’t necessarily know what restrictions, you may have been subject to so you would need to engage with someone.
00:27:41.340 –> 00:27:47.040
Paul Carelis: educated in tax credits to determine your eligibility and then also to calculate the credits to claim.
00:27:47.550 –> 00:27:53.190
Paul Carelis: Then, once you have your credit amounts it’d be broken up by quarter, you would then go back to your payroll company and let them know.
00:27:53.610 –> 00:28:02.640
Paul Carelis: hey payroll company, I need to amend my return to claim employee retention credits and then, if you were working with us or someone else determine those credits, we would.
00:28:03.060 –> 00:28:07.950
Paul Carelis: provide you with all the information you need to submit to your payroll provider, so that they can amend those returns on your behalf.
00:28:09.330 –> 00:28:17.490
Paul Carelis: Once those have been submitted, you then you would receive the check in the mail, it would come to your business it wouldn’t go to the payroll company.
00:28:20.250 –> 00:28:21.900
Paul Carelis: let’s see what else we have for questions here.
00:28:29.550 –> 00:28:34.260
Paul Carelis: You mentioned PPP funds and other federal funds that payroll must be reduced by what about other grants.
00:28:35.880 –> 00:28:45.210
Paul Carelis: So really the magic thing you want to look for in even we talk about PPP or restaurant revitalization are all those other programs.
00:28:47.220 –> 00:28:59.280
Paul Carelis: You don’t necessarily need to fully exclude those and each program is different in terms of the requirements and what you need to spend the money on some are very specific and the PPP had pretty strict definitions, you need to spend at least 60% on payroll.
00:29:00.630 –> 00:29:03.780
Paul Carelis: And then there are other eligible expenses, you can just spend it on whatever you want.
00:29:07.830 –> 00:29:19.140
Paul Carelis: that’s That being said, you only need to exclude grant money that you, you funded payroll with so let’s say let’s say you got a restaurant revitalization fund grant, for instance in quarter to.
00:29:20.220 –> 00:29:31.980
Paul Carelis: If you and you have a lot of time to use those ones, especially I think you have through 2023 to use our funds, but if you use those on capital capital expenditures let’s say.
00:29:32.550 –> 00:29:43.260
Paul Carelis: kitchen equipment or rent or utilities, or anything else that wasn’t payroll you don’t have to exclude those dollars from your TC calculations it’s strictly.
00:29:44.280 –> 00:29:56.070
Paul Carelis: When we talk about pvp, especially where 60% of those do have to be used on payroll costs that at a bare minimum, is what you need to exclude if you use 100% of your pvp on on payroll then yeah we’re going to have to exclude the entire amount.
00:29:57.120 –> 00:30:05.370
Paul Carelis: But whatever in terms of your forgiveness application whatever you listed for payroll costs as what we need to exclude the grants themselves don’t don’t exclude.
00:30:05.760 –> 00:30:13.080
Paul Carelis: it’s just a matter of what was actually spent on payroll just so you avoid getting a credit on any payroll that you paid with with some of these funds.
00:30:17.280 –> 00:30:26.850
Paul Carelis: Is there a tax liability attached to receive an etc yeah so the the one potential downside, the rtc, especially because it can be a lot of money.
00:30:27.450 –> 00:30:31.320
Paul Carelis: Sometimes thousands sometimes over a million dollars and, in certain instances.
00:30:31.950 –> 00:30:40.290
Paul Carelis: Is that it is considered taxable income for the for the business and it’s considered taxable based on the quarter that you’re claiming the credit on so.
00:30:40.920 –> 00:30:58.050
Paul Carelis: Even if you’re claiming it now if you’re claiming for let’s say q3 of 2020 at least as far as the current guns goes that that credit is considered taxable income for q3 of 2020 question great question here about gross receipts.
00:30:59.940 –> 00:31:09.630
Paul Carelis: To gross receipts, excuse me do PPP loans count towards the gross receipts calculation no they don’t so there was a lot of question about that initially that wasn’t.
00:31:11.100 –> 00:31:23.610
Paul Carelis: Originally in any guidance, but the irs to clarify and made a safe harbor so that if you did receive a pvp loan, you do not have to count that money towards your gross receipts calculation when when measuring whether or not there was a declined.
00:31:32.010 –> 00:31:51.150
Paul Carelis: Alright, we qualified q2 did not have a decline, but we then had a 20% decline in q3 of 2021 do we qualify for that quarter, yes, so as long as you can find a quarter of eligibility, you can claim that even if you’re not eligible in previous quarters yeah so.
00:31:52.440 –> 00:32:02.730
Paul Carelis: That does come up from time to time, and quite often where there, there may be one or two quarters out there, that for any number of reasons, did suffer a decline and you can can apply for those quarters.
00:32:03.300 –> 00:32:10.470
Paul Carelis: it’s great if it’s a quarter prior to quarter three because then again with the proceeding quarter rule that essentially gives you two quarters of eligibility but.
00:32:12.000 –> 00:32:13.200
Paul Carelis: One quarter is better than none.
00:32:16.560 –> 00:32:23.460
Paul Carelis: right we participate in PPP loans and 2020 every eligible for credits and 2020 yeah so yeah it’s just a matter of.
00:32:24.000 –> 00:32:34.530
Paul Carelis: factoring in your pvp loan how much of it did you use on payroll costs, excluding that from from the wages you paid in 2020 and working around that to determine what credits may be available to you.
00:32:39.060 –> 00:32:51.930
Paul Carelis: How was the irs notifying employers of the issuance of the paper check it’s been eight months since we’ve applied so yeah unfortunately there are there are folks that have been waiting quite a while some of them have come back as quickly as four or five months.
00:32:53.190 –> 00:33:03.360
Paul Carelis: irs originally said it shouldn’t be longer than seven months, but we are seeing some some returns extending and going beyond that point.
00:33:04.290 –> 00:33:19.350
Paul Carelis: In terms of how to answer your question you’re going to want to request or if you use a payroll provider who’s filing your taxes on your behalf, have them request an irs transcript for the quarter, that the rtc applies to.
00:33:20.610 –> 00:33:33.510
Paul Carelis: That transcript will first confirm that the irs received the amended return it’ll show what date they kind of filed it it won’t that that doesn’t mean that they necessarily started to work on it, but they entered it into their system and assigned it to somebody.
00:33:35.340 –> 00:33:41.640
Paul Carelis: And that they just really confirmed that they’ve received it, it can again be several months after that date, before you see something.
00:33:42.150 –> 00:33:52.830
Paul Carelis: But when the the credit is issued, it will update the transcript to show better credit has been issued there’ll be a date associated with that and then generally within.
00:33:53.730 –> 00:34:00.120
Paul Carelis: You know, three to seven business days from that date on the transcript of when they’ve issued the credit is when you should expect to see that in the mail.
00:34:12.510 –> 00:34:23.340
Paul Carelis: Is the 313 2022 930 2021 eligible period, based on wages paid or wages earned so you generally want to use the irs construct constructive receipt.
00:34:25.350 –> 00:34:31.410
Paul Carelis: theory which basically says when they were paid so when they were constructively received meeting the check dates when they were paid.
00:34:38.640 –> 00:34:40.860
Paul Carelis: How long does it take to send the check so again.
00:34:42.030 –> 00:34:54.330
Paul Carelis: For people who jumped on this in the quarters that they were active in and were able to get the credit on the the 941 when it was being filed regularly those were pretty quick, but again, everything that was on amended returns and.
00:34:55.920 –> 00:34:59.400
Paul Carelis: it’s generally taking i’d say several months anywhere from.
00:35:00.420 –> 00:35:02.490
Paul Carelis: Four months to seven months, plus.
00:35:11.940 –> 00:35:25.860
Paul Carelis: Have you seen companies analyze suspension of operations related to sales across state lines and multiple jurisdictions, for example, selling to schools or restaurants and 50 states has this kind of research, a non starter in my observation.
00:35:28.050 –> 00:35:29.430
Paul Carelis: Not necessarily.
00:35:30.870 –> 00:35:38.370
Paul Carelis: Again we’re anticipating some level of scrutiny on this down the road, so what you would really want to do if you were going to approach it from that method.
00:35:40.260 –> 00:35:48.900
Paul Carelis: would really be get all your ducks in a row, a be able to show you know state by state what the restriction was what the dates of the restriction were.
00:35:50.220 –> 00:36:04.320
Paul Carelis: And then, on top of that, be able to show that in 2019 you know at least 10% of your revenues at 10% of your staffing was derived from those those places where you were restricted and claiming eligibility for.
00:36:15.750 –> 00:36:24.990
Paul Carelis: There are some questions in here about like corporate returns and forms 994 nonprofits terms of how to record the payment, I will have to defer to.
00:36:25.440 –> 00:36:36.060
Paul Carelis: Your accountant or CPA on those I don’t want to miss judge or provide any legal or financial advice in terms of tax filings that i’ll leave that part to the to the filing experts.
00:36:45.360 –> 00:37:00.510
Paul Carelis: If it was not a government restriction, but you had people out do to cool it and still pay them and 2021 does that count for the credit it wouldn’t count for employee retention credits, it would potentially qualify for some of the coven sick leaves that were available.
00:37:01.680 –> 00:37:02.640
Paul Carelis: At the time, so.
00:37:04.350 –> 00:37:06.780
Paul Carelis: Hopefully you took advantage of the opposite leave in the.
00:37:07.800 –> 00:37:11.490
Paul Carelis: FF CRA code sick leave to pay those people, while they were out with coven.
00:37:15.270 –> 00:37:23.640
Paul Carelis: Okay, and someone just wanted me to clarify what to ask the payroll provider for to confirm receipt so you want you want to get a irs transcript of your 941.
00:37:24.030 –> 00:37:33.900
Paul Carelis: For whatever quarters you you filed the rtc and so, if you claimed employee retention credits in q3 and Q4 of 2020 and q1 of 2021.
00:37:34.350 –> 00:37:42.270
Paul Carelis: You want them to request the transcript for each of those quarters for the 941 and they’re not the easiest thing in the world to read, but.
00:37:42.960 –> 00:37:55.110
Paul Carelis: If you kind of go line by line, you should see a line you know, some weeks after the company file that return for you can I went through the mail so when have been instantaneous but let’s say you.
00:37:56.010 –> 00:38:10.170
Paul Carelis: You applied for for these all in February of last year, you should see a line item probably dated sometime in March that that says amended return filed and again that just means that they received it and assigned it out.
00:38:11.340 –> 00:38:13.230
Paul Carelis: So that’s what you want to look for on the transcript.
00:38:19.410 –> 00:38:23.130
Paul Carelis: If OSHA restricted access, what kind of impact would that have.
00:38:25.110 –> 00:38:30.570
Paul Carelis: That could potentially qualify it’s all about the narrative and being able to.
00:38:31.920 –> 00:38:38.550
Paul Carelis: feel confident certain that, whatever that impact was that prevented your operation so we’ll go over a couple scenarios in a minute.
00:38:39.600 –> 00:38:46.440
Paul Carelis: As time allows but I know, one of the ones that the irs use that I thought has come in handy a little bit was they.
00:38:47.700 –> 00:38:49.830
Paul Carelis: They talked about a grocery store and they said.
00:38:51.390 –> 00:39:05.820
Paul Carelis: You know, there was a grocery store and because of some local regulations and these code restrictions, they can be federal level State level or city or local level two, but in this city in the example the grocery store was forced to shut down their salad bar.
00:39:07.290 –> 00:39:23.610
Paul Carelis: So, you know that there was an impact that was a restriction, but when push comes to shove, that salad bar did not account for 10% of the company’s gross receipts so that was not considered substantial enough to be a partial suspension of operations now if.
00:39:24.870 –> 00:39:25.140
Paul Carelis: You know.
00:39:26.670 –> 00:39:27.960
Paul Carelis: There are other scenarios.
00:39:29.010 –> 00:39:40.380
Paul Carelis: That in within that grocery store that could potentially qualify but it’s all a matter of what what was the impact of that restriction on your business are you still able to get the job done or not and we’ll go over some scenarios.
00:39:41.490 –> 00:39:42.330
Paul Carelis: in just one minute.
00:39:45.120 –> 00:39:50.340
Paul Carelis: So some other frequently asked questions that come up and I will also get to the questions that came in prior to the webinar.
00:39:52.320 –> 00:39:54.660
Paul Carelis: Are there any plans to automate for 941.
00:39:56.280 –> 00:40:04.050
Paul Carelis: There have been several requests businesses business groups accounting firms all of that, unfortunately, know.
00:40:05.580 –> 00:40:15.270
Paul Carelis: The credits and especially the modification of the credits that allowed so many more businesses to apply really caught the irs off guard as well, and they did not have.
00:40:15.900 –> 00:40:22.950
Paul Carelis: The software built or optimized to be able to handle all the requests that were coming in, so it is all paper as of right now.
00:40:25.020 –> 00:40:29.820
Paul Carelis: The good news is that they originally had all of the rtc returns going to one single.
00:40:30.360 –> 00:40:43.350
Paul Carelis: irs office, I want to say, maybe in Cincinnati but they had they do now have them being serviced by multiple multiple branches so they’re trying to get better but they’re certainly struggling to keep up with the with the volume.
00:40:48.000 –> 00:40:52.350
Paul Carelis: Of the question that we get doesn’t employee need to prove that a significant decline of gross receipts is related to coven.
00:40:53.640 –> 00:41:02.670
Paul Carelis: The answer to that is no so I can think of a group I worked with where they had owned three restaurants and they sold, one of the restaurants.
00:41:03.510 –> 00:41:12.120
Paul Carelis: In 2020 so when you look in compared to 2019 when they had three restaurants versus 2020 and 2021 when they only had two restaurants, under that ID.
00:41:13.110 –> 00:41:25.440
Paul Carelis: This kind of naturally declining gross receipts and i’m sure they were impacted by cool and 19 as well, but there’s no there’s no need under the gross receipts eligibility to have any tie into Cobra 19 necessarily.
00:41:31.650 –> 00:41:42.360
Paul Carelis: So we went over this a little bit before but it’s worth repeating in terms of determining your size and your employee count for eligibility as a small employer for etc, you want to look at.
00:41:44.040 –> 00:41:54.750
Paul Carelis: Look at every employee who averaged 30 hours per week or 130 hours per month for each month, and then, once you have your 12 monthly totals of full time employee accounts divide that by 12.
00:42:01.980 –> 00:42:14.640
Paul Carelis: A question that comes up often, and this is a great problem to have what if my tax credit exceeds what my tax liabilities were in that quarter so let’s say your payroll tax liabilities were $50,000 in quarter three but.
00:42:15.750 –> 00:42:29.070
Paul Carelis: you’re showing a $500,000 credit for q3, this is a fully refundable credit, so you will get all that money back in the form of a check it does not have to does not have to meet or be under what your actual tax liabilities were.
00:42:34.050 –> 00:42:47.100
Paul Carelis: Alright, so again, I think we’ve we’ve defined this it’s just important that if you if you do have some Gray area you’re not qualifying under gross receipts you do really just want to scrutinize that interruption to your business to make sure it qualifies.
00:42:49.830 –> 00:42:58.950
Paul Carelis: We do have some decision trees available for anyone interested if you want to kind of go through your own individual scenario would be happy to share these with you, we can send them out later today.
00:43:00.180 –> 00:43:04.980
Paul Carelis: But in terms of determining winner when whether or not a.
00:43:06.300 –> 00:43:14.340
Paul Carelis: Suspension of operations has occurred wanted to just kind of share five or six examples to hopefully help you in case, this may be a situation you’re facing.
00:43:15.720 –> 00:43:22.050
Paul Carelis: So the first of which the first scenario is a nonprofit that provides educational services in the Community.
00:43:23.160 –> 00:43:34.230
Paul Carelis: So in this example, this nonprofit where it was able to transfer some of their services remotely do some Tutoring some reading assistance and things like that, but other programs.
00:43:35.280 –> 00:43:43.620
Paul Carelis: Some you know physical education activities after school care of that were mandated clothes are restricted because of coven 19.
00:43:44.970 –> 00:43:55.560
Paul Carelis: In this case, this would count as a full or partial suspension, provided that more than 10% that the programs that were affected kind of for more than 10% of revenues or of staffing.
00:43:58.920 –> 00:44:13.080
Paul Carelis: Fast forward to a tech company so tech company had some remote workers, you know it did also have a large in office staff as well, but because of code restrictions, all of the office staff were required to work remotely they could not work in the office.
00:44:14.490 –> 00:44:15.690
Paul Carelis: But being a tech company.
00:44:16.800 –> 00:44:25.290
Paul Carelis: All the employees were able to do their jobs, you know, there was very minimal impact on the business operations, they were restricted that they can couldn’t be in person.
00:44:26.820 –> 00:44:39.480
Paul Carelis: But the irs guidance to date has been that if if that the business was able to largely continue as as is with through remote work and telework that would not count as a suspension of operations.
00:44:44.100 –> 00:44:49.920
Paul Carelis: what’s nice go over a brewery so this brewery has three different production facilities in three different States.
00:44:51.480 –> 00:45:01.770
Paul Carelis: Of those three one location had a tap room that tap room was closed because of code restrictions people were not allowed to consume alcohol on premises because of code restriction.
00:45:02.910 –> 00:45:04.740
Paul Carelis: Through quarter to of 2021.
00:45:06.000 –> 00:45:08.010
Paul Carelis: Because they’re largely production.
00:45:09.930 –> 00:45:15.450
Paul Carelis: Their gross receipts actually increased they did not have any any quarters of decline, good for them.
00:45:18.870 –> 00:45:24.720
Paul Carelis: In this instance, provided the tap room accounted for at least 10% of staff or 10% of revenues for.
00:45:25.830 –> 00:45:37.920
Paul Carelis: All of the breweries and combining revenues there, they would still qualify and be able to apply the credit to all workers and all of the locations, because the business overall had that partial suspension of operations.
00:45:42.360 –> 00:45:45.720
Paul Carelis: let’s talk about next some controlled ownership scenarios.
00:45:47.640 –> 00:46:00.060
Paul Carelis: So you do want to be mindful when you do when you do have a control group so in our example here there’s a husband and wife, they fully own two businesses, one being an auto Body Shop and the other being a restaurant.
00:46:01.710 –> 00:46:10.200
Paul Carelis: The Auto Body Shop accounts for 70% of the revenues of the business, they were considered a central they didn’t have anything that would qualify as a.
00:46:11.670 –> 00:46:14.160
Paul Carelis: A restriction or suspension of operations.
00:46:16.050 –> 00:46:19.380
Paul Carelis: And they’re they’re gross receipts were also steady.
00:46:22.080 –> 00:46:30.780
Paul Carelis: Because the restaurant accounted for 30% of revenues all of those restrictions that applied to the restaurant because of the aggregation rules and because there are controlled ownership group.
00:46:31.320 –> 00:46:40.680
Paul Carelis: They be able to claim credit on the auto Body Shop wages as well because part of that entity was sufficient part of the entity was subject to restriction.
00:46:43.800 –> 00:46:46.440
Paul Carelis: In terms of ownership shared ownership eligibility.
00:46:47.640 –> 00:46:56.280
Paul Carelis: A scenario where there’s a gym three college friends unrelated to one another, each own a third of the the fitness Center and they’re all on the payroll is w two employees.
00:46:57.420 –> 00:47:03.780
Paul Carelis: In this scenario, because they’re not related and none of them own 50 51% or more of the business.
00:47:05.400 –> 00:47:08.850
Paul Carelis: They were there we just would be eligible for employee retention credits.
00:47:11.220 –> 00:47:27.690
Paul Carelis: let’s say it was yeah let’s say it was different let’s say two of those college friends were married so they own 66% the one owner who owns a third and isn’t related to the other two their wages will be eligible, but the husband and the husband and wife, that on 66%.
00:47:29.490 –> 00:47:36.780
Paul Carelis: There, which will be excluded and then any family members that they have on the payroll that they are paying as employees their wages would also be excluded.
00:47:38.700 –> 00:47:48.720
Paul Carelis: And finally let’s talk about a museum scenario so museum, you know, was able to stay afloat and not suffer declines, because they had some great fundraising they had some very generous.
00:47:49.770 –> 00:48:03.330
Paul Carelis: contributors and people who donated to keep the gross receipts decline, so they were fine they they were not eligible by gross receipts, they were eligible because of restrictions throughout 2020 and into 2021.
00:48:04.590 –> 00:48:06.630
Paul Carelis: Fast forward to.
00:48:07.770 –> 00:48:10.170
Paul Carelis: 2021 they were able to reopen in June.
00:48:11.400 –> 00:48:24.330
Paul Carelis: But you know the donations dried up people are still afraid to go to the museum so they’re gross receipts fell off in q2 q3 in this scenario they can kind of mix and match so qualify based on gross receipts.
00:48:26.760 –> 00:48:33.000
Paul Carelis: Through through q2 of 2021 and then also be eligible, because of restrictions and following quarters.
00:48:37.500 –> 00:48:44.700
Paul Carelis: Alright, so before I dig into the the final set of questions here that just kind of leave everyone with some takeaways so.
00:48:45.480 –> 00:48:55.110
Paul Carelis: Some things you want to make sure you’re familiar with before you pursue your employee retention credits first understand the differences between the 2020 and 2021 programs.
00:48:55.860 –> 00:49:11.130
Paul Carelis: To make sure you’re familiar with how to calculate your size and what that means so, even if that number comes up over 100 yeah that’ll affect your eligibility for for 2020 but as long as you’re under 500 you can still be fully eligible for 2021 potentially.
00:49:12.420 –> 00:49:17.280
Paul Carelis: Do you understand how to determine gross receipts, so you have a good understanding, whether or not there was a decline.
00:49:18.690 –> 00:49:25.920
Paul Carelis: have an understanding for whether or not the effects that code and code regulations had on your business may qualify as a special of operations.
00:49:27.240 –> 00:49:32.280
Paul Carelis: Do you want to be familiar with the limitations on on owner income if it’s a 51% or greater owner.
00:49:33.600 –> 00:49:39.270
Paul Carelis: If you’re in a controlled ownerships scenario, you need to make sure you’re aggregating and all areas that you need to.
00:49:41.160 –> 00:49:56.400
Paul Carelis: really want to master maximizing around a PPP loan, so you can pull wages before the PPP as well as after it there’s a little a little bit of magic to that it’s something that we do and specialize in but you just want to make sure you don’t leave any credits on the table.
00:49:58.710 –> 00:50:02.880
Paul Carelis: Do also make sure you’re keeping very good records and and.
00:50:03.990 –> 00:50:09.690
Paul Carelis: And files when it comes to to all of this, so for clients we work with we provide a substantiation document that.
00:50:10.170 –> 00:50:19.350
Paul Carelis: Details know what the method of eligibility was what the time period was and what the credits were and how they are calculated, you want to keep something similar if you’re doing this elsewhere on your own.
00:50:20.940 –> 00:50:24.300
Paul Carelis: And, and we do recommend being pretty specific about the restrictions.
00:50:25.350 –> 00:50:32.130
Paul Carelis: What the restriction was who the governing body was that was issuing the restriction and what the time frame was for that restriction.
00:50:33.930 –> 00:50:48.270
Paul Carelis: number nine you know, please note this isn’t too good to be true, and really these numbers add up really fast, so you can have a company with 20 or 25 employees that can qualify for hundreds of thousands of dollars in credits and they’re very valid and very real.
00:50:49.350 –> 00:50:56.880
Paul Carelis: And then finally just just do exercise and patience, I know a lot of businesses could really use a financial shot in the arm and could really use this funding.
00:50:58.560 –> 00:51:11.640
Paul Carelis: The one thing I can say is just get it out get it filed as soon as you can to get the clock started with the irs also if you’ve jumped around from payroll systems it’s good to get it done sooner rather than later, because sometimes some of that finer.
00:51:12.690 –> 00:51:19.980
Paul Carelis: paycheck by paycheck employee wage data can get get lost along the way, so do jump on this as soon as as possible.
00:51:20.850 –> 00:51:32.250
Paul Carelis: You do have up to three years after the due date for whatever quarter 941 you’re going to be amending, so there is still some time but, again, you do want to get your question as soon as possible to get the funds as soon as possible.
00:51:35.670 –> 00:51:40.410
Paul Carelis: So I did just want to address a few more questions before we run out of time here.
00:51:44.940 –> 00:51:51.870
Paul Carelis: majority of our gross receipts come from contracts with schools, who are shut down does this qualify, even though my business itself was not required to shut down.
00:51:53.310 –> 00:51:57.270
Paul Carelis: yeah potentially so you know whether your construction or whatever you are if.
00:51:57.810 –> 00:52:08.730
Paul Carelis: The place where you do business, if you weren’t able to do business, the way that you do, whether or not that’s on your own property or you know, in whatever your business specializes in that could potentially be an avenue for eligibility yes.
00:52:16.920 –> 00:52:18.210
Paul Carelis: Looking at our questions here.
00:52:21.000 –> 00:52:38.370
Paul Carelis: Most of these is this credit still available if we’ve already filed or 2021 taxes, yes yep so again you have if you’re filing let’s say for 2021 you have up until three years after that original 941 was due to file, so you can definitely still amend your returns.
00:52:48.570 –> 00:52:52.890
Paul Carelis: Were small startup with only one paid employee for partners.
00:52:54.030 –> 00:52:57.180
Paul Carelis: Profitability was impacted or we eligible for funds have offset.
00:52:58.860 –> 00:52:59.550
Paul Carelis: Our costs.
00:53:00.600 –> 00:53:07.710
Paul Carelis: Yes, I mean it would be limited to that one employee, so he rtc probably wouldn’t be the most advantageous or most fruitful.
00:53:09.120 –> 00:53:16.980
Paul Carelis: source of money for you, but definitely look at other programs, we did a little while back do a webinar with the Small Business Administration.
00:53:17.310 –> 00:53:23.880
Paul Carelis: There should be a recording of that available via our website so do look into that and to some potential other programs that may be available for you.
00:53:24.660 –> 00:53:36.630
Paul Carelis: The TC is restricted and only eligible on employees who received eligible wages so partners independent contractors no monies paid to those folks would not be eligible wages for this program.
00:53:42.750 –> 00:53:48.840
Paul Carelis: We have over 400 employees and receive the pvp loan that was forgiven what are eligibility restrictions so.
00:53:49.320 –> 00:54:00.600
Paul Carelis: Assuming at least assuming you’re talking about 2019 employee count and assuming at least 100 of those employees were full time most likely would have pretty limited eligibility in 20.
00:54:02.910 –> 00:54:16.380
Paul Carelis: But you are well under the the threshold for 2021 so just working around your second drop pvp in 2021 if you’re otherwise eligible based on restrictions across receipts, you could have a very healthy credit coming your way.
00:54:19.680 –> 00:54:21.780
Paul Carelis: let’s see try to do one more.
00:54:25.260 –> 00:54:32.460
Paul Carelis: We received to pvp loans, we did not qualify based on gross receipts our business was not shut down during COPA.
00:54:33.600 –> 00:54:44.940
Paul Carelis: were unclear if we may be eligible, based on business disruption or other qualifying criteria, so you know it’s hard to say without knowing the business or the industry or or what the restrictions that that hampered your operations were.
00:54:46.560 –> 00:54:54.210
Paul Carelis: But we’d be happy to talk to you, this is a service that we provide for businesses, whether or not you use us for payroll you can use us for employee retention credits and.
00:54:54.510 –> 00:55:06.990
Paul Carelis: There is no obligation for the consultation and the eligibility determination we do not, we don’t charge anything until until you’ve received your credit so can’t hurt to give us a shout and we’ll be happy to talk through it with you.
00:55:10.980 –> 00:55:19.140
Paul Carelis: So it looks like those are the questions we can get to at the moment again happy to answer any more offline if you have a specific scenario that you’d like to discuss with a.
00:55:20.190 –> 00:55:27.660
Paul Carelis: One of our professionals here on the team would be happy to do it, but other than that I will hand things back over to kaitlyn to close us out for today Thank you so much.
00:55:30.690 –> 00:55:39.420
MP: valuable information on a complex topic any questions that were not able to be answered on today’s program or receive a response via email within five to seven business days.
00:55:39.900 –> 00:55:48.840
MP: Then P HR team is here to help guide your organization on any HR compliance issues, if you would like to learn more about how we can assist your organization.
00:55:49.200 –> 00:55:56.940
MP: Please visit our website to set up a short 15 minute call will be sure to join us next week on the same day and time for our webinar on.
00:55:58.020 –> 00:56:06.720
MP: recruiting best practices to land top talent now visit our website to register and to see the full calendar of upcoming events and available resources.
00:56:07.050 –> 00:56:13.920
MP: We will be sending out a recording of today’s webinar with the presentation slides this afternoon thanks for joining and have a terrific day.
If the pandemic impacted your business or nonprofit, you’re likely to be eligible for an ERC: a refundable, advanceable credit that could be over $1 million. Employers across all industries are claiming ERCs of hundreds of thousands of dollars (some over $1 or 2 million!). Since inception, the ERC program dramatically expanded eligibility and increased the amounts of potential claims. Join MP’s HR and payroll experts to find out how to start claiming relief funding for your organization immediately.
Register for the webinar to:
- Find out the latest timelines and deadlines
- Get an outline of the most updated eligibility requirements
- Understand how to maximize credits and reduce turnaround time
- Learn what business data you’ll need to file an audit-proof claim
Paul Carelis SHRM-CP, PHR
VP of HR Services, MP