For many businesses, the ERTC can be the difference between staying open and closing their doors forever. But it can be difficult to keep up with the ever-changing rules and requirements around claiming this credit.
The IRS recently issued guidance to help tax pros meet their Circular 230 professional responsibilities when preparing original, amended, or refund returns relating to the ERTC. Here’s how.
Help Your Clients Understand the Changes
The Employee Retention Credit (ERTC) is on the minds of many clients. Congress established the refundable tax credit in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in 2020 to encourage employers to keep their employees on staff during COVID-19 business shutdowns or slowdowns.
The credit allows businesses to subtract a percentage of eligible wages from their employment taxes. Unlike a tax deduction, which only reduces a business’s taxes, the ERTC is a credit that can be applied to all employment tax liabilities, including social security and Medicare taxes.
As the ERTC changes come into effect, accounting professionals like ADP Compliance can help their clients determine their eligibility for this tax credit. To do so, they should review their client’s payroll records from the past few years to see if they have any ERTC-eligible workers. They can also assist their clients in locating all the necessary documentation to file an amended Form 941 with the IRS to claim the credit.
The new ERTC rules can create additional work for accountants, particularly those with smaller client bases. For example, if a client has many ERTC-eligible workers, the accountant may need to adjust their existing spreadsheets to reflect the increased credits manually. This could add up to hours of manual work for already busy accountants.
Help Your Clients Determine if They Are Eligible
For many small businesses, the Employee Retention Credit (ERTC) is a once-in-a-lifetime opportunity to reward and keep employees on during this unprecedented economic crisis. However, knowing whether a client is eligible can be difficult with shifting deadlines and requirements. Working with a tax professional experienced with the CARES Act and other grant, loan, and tax credit programs is essential.
It is important to remember that even if a business has taken a PPP loan, it can still claim the ERTC. The ERTC and PPP were originally incompatible, but the Consolidated Appropriations Act of 2020 rectified this by allowing companies to take advantage of both programs.
To be eligible for the ERTC, a business must demonstrate that it suffered effects due to government orders. This includes a partial shutdown, reduced services, reduced capacity or limited equipment availability, and an inability to get goods from suppliers.
Help Your Clients Determine the Size of Their Credit
Taking advantage of the Employee Retention Credit is more complex than simply hiring a payroll company and paying employees. You must also submit a special IRS form detailing the qualifying wages and health insurance costs. A professional accountant and a tax software firm can help your clients file this form.
As you work with your clients, explain the size of their credit. Your clients must know how much this refundable credit could benefit their business. It can be a great incentive to keep them from firing their employees.
While the ERTC program may have expired in 2021 with the passing of the Consolidated Appropriations Act, businesses can still retroactively claim it through their tax returns. This means that small businesses can continue to take advantage of this valuable tax incentive. In a recent study, accounting professionals shared that young entrepreneurs expect flexibility from their advisors. Additionally, a report by Onpay shows that many small business owners follow the recommendations of trusted friends or colleagues.
While bringing the ERTC credit to your client’s attention is an excellent way to grow your client base, some accounting professionals need more time to manage their clients’ filing process. Luckily, services now allow CPAs and accounting firms to partner with ERC specialty firms, so their clients can take advantage of the credit without the extra burden on their practices.
Help Your Clients Prepare Their Claim
Keeping your clients in the loop with the latest information on ERTC can help your firm gain credibility as a trusted advisor. Consider partnering with a specialist ERC service that can handle the complexities of the program for your clients.
Services like ERC Today offer effortless data collection (including a portal for businesses to upload 941 returns, PPP loan documents, and raw payroll), credit calculation, help with amending returns, and other benefits such as free consultations, a guarantee that you’ll receive the IRS tax refund, minimal upfront costs, and a high success rate.
Lastly, to gain more clients by leveraging your expertise, attend local networking events to meet potential candidates and speak with them about their needs. Depending on your niche, these can be HR, marketing, or cash flow and growth modeling seminars. Attending these events will show that you’re dedicated to your industry and care about meeting your audience’s needs.
In conclusion, accounting professionals play a vital role in helping their clients navigate the changes to the Employee Retention Tax Credit (ERTC). By staying up-to-date with the latest regulations and providing expert guidance, accountants can ensure that their clients optimize their eligibility and maximize their benefits from this program.
Through comprehensive analysis and strategic planning, accounting professionals can help businesses understand the requirements of the ERTC and implement necessary changes to qualify for the credit.
Additionally, accountants can assist in documenting and substantiating expenses, ensuring compliance with IRS guidelines. With their expertise and support, accounting professionals are valuable partners in helping clients adapt to these evolving regulations and seize opportunities for financial relief.