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Leave No Tax Credit Unclaimed (ERC)

By Michael Stier

Only 39% of employers with fewer than 500 employees are aware of the Employee Retention Credit (ERC) and, worse, only 20% of business owners plan to claim the ERC. Quite remarkable given, for many businesses, they are potentially leaving significant amount of money unclaimed. Eligible employers can now receive: 

  • up to $5,000/employee paid from 3/12/20-12/31/20. 
  • up to $7,000/employee per quarter for 2021. 

Key Takeaway 

The ERC was not widely used until March 2021, when updated IRS regulations made this type of COVID-19 Relief more accessible. In short: thousands of businesses who once picked between the Paycheck Protection Program (PPP) and ERC can now possibly use both, by amending their 2020 Quarterly Form(s) 941. If eligible, employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit. The latest relief measure extended the ERC again through Dec. 31, 2021. Dependent on payroll size, credits of tens or hundreds of thousands of dollars (or millions for larger businesses) are possible. 

However…

You won’t be surprised to hear that the eligibility rules are complex and rife with exceptions. It’s hard to imagine many business owners who have the expertise in-house to evaluate their eligibility, refile their 941s and craft their applications for the credit. And many CPA firms are too busy with their regular business to devote the significant resources to evaluate each client’s unique eligibility status. And if they did have the resources, the cost in hourly fees to businesses who MAY or MAY NOT be eligible can be off putting (to say the least). 

Challenge Creates Opportunity 

I have been intrigued by a handful of new service providers who have formed to tackle this challenge. ERC specialists, staffed by CPAs, have created a streamlined, systems-driven service offering to help businesses determine eligibility and process their applications. Instead of charging hefty hourly fees, they get compensated on a contingency basis. They get paid only if your company receives the credit from the IRS — taking a small, fixed percentage of the actual monies you receive. This removes a significant financial risk to businesses who could potentially benefit from this additional government assistance. 

If you are a small business owner, and have not yet explored the ERC, talk to your CFO or other financial advisors, or you can reach out to FocusCFO for help. We’ve been able to assist our clients obtain millions of dollars in employee retention credits. 

Michael Stier is an Area President for FocusCFO based in Charlotte, NC. 

Founded in 2001, FocusCFO is the leading onsite fractional CFO services provider in the Midwest and Southeast, with more than 100 CFOs and Area Presidents throughout Ohio, Michigan, Kentucky, Indiana, Pennsylvania, Tennessee, and North Carolina. FocusCFO works closely with small to medium sized businesses helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. For more information, visit us at focuscfo.com or follow us on LinkedIn. 

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