Employer Retention Credit Expanded Part 2

Given the gravity of the changes and how much this can affect your business, I’m going to take the example used in Monday’s communication a couple of steps further.

Let’s review.

You have 5 employees who are paid $2,000 per month. That’s $10,000 in monthly payroll or a PPP Loan of $25,000.

The computation of the ERC with the same facts and circumstances is as follows. $30,000 in qualifying payroll per quarter or an ERC of 70% totals $21,000 per quarter. There are four quarters in a year totaling $84,000.

Please also realize that now, you can do both. Let’s add the PPP Loan to the equation with a drop date of February 15, 2021. How does all of this work now?

1 – We claim the ERC on the payroll from January 1st through February 14th. That’s $15,000 in payroll at 70% for a credit of $10,500.

2 – We received the PPP on February 15th of $25,000. We cannot use the same payroll to claim the credit that we use for forgiveness on the loan. We need $25,000 in payroll which is 2 1/2 months. That takes us 10 weeks forward to roughly May 1st.

3 – We now claim the ERC for the rest of the 2nd Quarter. That’s $20,000 in payroll for May and June at 70% is another $14,000.

4 – We claim the credit in the 3rd & 4th quarters of 2021. That’s $60,000 in payroll at 70% for another $42,000 in benefit.

Effectively we have wrapped the ERC around the PPP. Add it all up and what do you have? It’s $91,500 in refunds and free PPP money on $120,000 of payroll.

But wait, there’s more.

We can still amend the 4th Quarter of 2020 because we determined that the payroll necessary for forgiveness on our first PPP Loan was used up in the 3rd Quarter of 2020. That $30,000 in payroll this time at 50% get’s us another $15,000.

We are now looking at $106,500 in benefits from $150,000 in payroll.

Let me leave you with this.

I hope you are beginning to understand the complexities of this opportunity. The example I used is a very small payroll. Imagine how much larger the numbers can become.

Please also realize that there isn’t anything easy about this. The bookkeeping, accounting, and tax prep on this is ridiculously complex. Few are capable. Sloppy work on these forms isn’t tolerated. Most of the forms prepared by lesser practitioners are being rejected out of hand.

I wanted to take you through the example so that you can understand what I’m proposing. I’m putting together a process that incorporates preparation of all five or six quarters of the ERC taking into consideration the payroll necessary for forgiveness on the PPP.

Only with that coordination can one actually receive the benefits that have been offered. I’m still in the process of finalizing my thoughts. One thing that will be incorporated is one set of amendments per quarter if necessary.

The IRS is still standardizing their process of handling the refunds and they’re making substantial mistakes. Frankly, it looks like they’re trying to not refund these credits. As such, anything we do will include an automatic set of amendments in case we don’t receive a proper response.

I’m putting together another page on my website, standardized fees, and an agreement. Stay tuned. More will follow.

We’re all going to get through this. Let’s get through it together.

Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. If there is anything you need, whether you are a current client or not, you have but to ask. I’m here and I remain,

Sincerely yours,

Chris Amundson
Accounting Solutions Ltd.


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