| || |
Recession or not, we have resources to help your business master this moment of high interest rates, labor shortages, sticky inflation, and slower growth. We've put together our Agility & Excellence Resource Center to bring you strategies and solutions with a finger on the pulse of what's ahead.
Employers who are thinking about pursuing the Employee Retention Tax Credit (ERTC) should act now. The deadline for filing claims for all quarters in 2020 is next April. The deadline for filing claims for all quarters in 2021 is April 2025.
The ERTC has surged in popularity since it was enacted in 2020, with over 2.5 million claims filed to date. However, this popularity has also led to challenges. The IRS Commissioner has requested Congress pass legislation to accelerate the filing deadlines due to the number of aggressive, fraudulent and excessive claims.
Eligible employers who wait too long to file their ERTC claims may lose the opportunity to claim the credit, even before the official due dates. The time investment required to determine ERTC eligibility, compute available credits, complete substantiation requirements and file claims can be significant, so it is important to start the process early.
Originally passed as part of the CARES Act in response to the COVID-19 pandemic, the ERTC is a refundable federal employment tax credit available for the 2020 and 2021 calendar years. The amount of the credit depends on the employer's eligibility and other factors and can be worth up to $5,000 per employee for 2020 claims and $21,000 per employee for 2021 claims. Not all employers are eligible for the ERTC, and those who are may not be able to claim the maximum credit. Due to the complexity of the ERTC, a feasibility study is often necessary to determine:
- Whether the employer is eligible
- The basis for the employer's eligibility
- The employer's eligible quarters for 2020 and 2021
- The employer's estimated credit per eligible quarter
Employers considering the ERTC should retain a professional tax advisor experienced with ERTC to help them make these assessments.
Retaining the Best ERTC Advisor
Unfortunately, many employers have retained advisors who have prepared erroneous, aggressive and sometimes fraudulent ERTC claims. These advisors, commonly referred to as "credit mills," may put employers using them at increased risk for more intrusive IRS examinations and the potential repayment of the ERTC claimed, along with interest and steep penalties.
Therefore, it is in an employer's best interest to carefully review the qualifications of potential ERTC advisors, including their professional qualifications, how long they have been in business, their ERTC claim experience, their fee arrangements and terms of engagement, required ERTC substantiation and other documentation they provide, along with other key factors.
In addition to IRS audit risk, erroneous and aggressive ERTC claims can adversely affect an employer's business in other ways, such as:
- Financial statement audits
- Loan covenants and applications
- Due diligence questions and holdbacks from a buyer in a pending business sale
For these reasons and many others, retaining a reputable and experienced advisor to assist with an ERTC claim is prudent and smart from a business perspective.
CBIZ has many tax and financial professionals experienced in ERTC eligibility and claims process. Our professionals have assisted clients with thousands of ERTC claims for a variety of industries throughout the country. Since 2020, we have assisted clients with:
- Assessing their ERTC claim qualifications and risk
- Calculating estimated credits
- Providing education and guidance on the ERTC claims process, timing, and expectations
If you are interested in determining your company's ERTC eligibility, please connect with us.
Copyright © 2023, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.
CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly traded and privately held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).