Are franchises eligible?

Yes. As long as they have their own EIN number and between 5 – 500 full-time W-2 employees

What if the company only had part time employees?

The IRS considers an employee as being full time, for purposes of ERC, if they worked at least 30 hours per week.

Part time employee compensation is not considered part of “qualified wages” (which gets to what the refund is based on), so in effect they don’t generally count for purposes of the ERC.

Part time folks don’t work against you when it comes to the 500 limitation, but they also aren’t counted toward the minimum 5 if the business falls on that end of the spectrum.

There are exceptions to the “general” rule (and this is one of them) – which works around averages for purposes of qualifying part time folks in the aggregate. No individual part time person qualifies, but there is the potential they can in the aggregate when certain hourly thresholds are met. This is a bit subjective based on how the notice reads, but is an interpretation.

So, given this interpretation, it is theoretically possible to have a company qualify that is straight part time folks (to your question Brianne), but we just don’t see it often because it’s generally indicative of a smaller company that’s not hitting the hours it needs to co-mingle part-time folks together for purposes of the calculation.

Can a 501c6 apply for ERC?

Organizations described in section 501(c) of the Internal Revenue Code (the “Code”), and exempt from tax under section 501(a) of the Code, may be Eligible Employers for purposes of the Employee Retention Credit if they are employers that otherwise meet the requirements to be eligible for the credit

Can a private college apply for ERC?

Yes. If they meet the guidelines eligible for the ERC.

Does a C6 non profit qualify? Example “chamber of commerce“

ERC credit can be claimed by any eligible employer, which includes tax exempt non-profit organizations, even if they previously received PPP.

How do forgiven PPP loans effect the ERC refund?

An eligible employer can claim the ERC on any qualified wages that were not counted as payroll costs in obtaining PPP loan forgiveness. So essentially, if the wages weren’t already counted in the PPP loan forgiveness, they can now be counted for the ERC. They just can’t be used in both. No “double-dipping.”

Is the ERC refund taxable?

The ERC is technically 100% tax free per guidance in Notice 2021-20.

However, the IRS doesn’t like the idea that you previously took a deduction for employment taxes that you’re now receiving back (they call that double dipping) so those previous year deductions are disallowed, which (in effect) makes a portion of the ERC taxable (not technically, but practically).

The amount is determined by the refund size, entity type, and owners marginal tax rate (assuming pass through entity).

What if my CPA firm won’t sign-off on ERC adjustments since it’s not their work?

The client’s current CPA doesn’t have to sign off on anything to do directly with the ERC. The amended 941s are signed by the client and BrightPoint.

For amended return (for previous disallowed deductions) – their CPA is not opining on anything to do with ERC by way of amending a previous return, they are simply ensuring the employment tax deduction is accurate and aligned to what has been reported to the IRS. It’s a very simple amendment.

The CPA could always have the client sign a disclaimer if they’re that nervous about amending a return, or the client can find a new CPA.

Is a company who sold their practice during the pandemic eligible for the quarters they owned the business, & new owners for the remaining?

Unfortunately, no. The business could still go back and claim a credit for the period in which it was owned by the previous owner, assuming they qualify, but the previous owner would not automatically be entitled to receive the refund. If it was negotiated that the previous owner gets a piece of credit with the current business owners, then of course an exception could be made.

We know if a company received PPP they will get less than if they hadn’t… so, instead of 100% of ERC, is there a ballpark % that would be safe to say? 80% of full ERC, 60%, 35%? looking for a ballpark figure…

PPP was the first two checks and made up mostly of what was available in 2020 for $5k or 15.2% of total available money of $26k. The first 3 quarters in 2021 represent $7k per quarter or 26.9%. So if a business qualified for 2020 and the first quarter of 2021, the most they would get is $12k or 46% of the total available ERC amount. There isn’t a way to say because you got PPP you only get X amount. It really depends on the type of business and where they are located and the local ordinances regarding COVID.

Is there a deadline to claim these ER credits?

2020: 15 April 2024

2021: 15 April 2025

Can a corporation with wholly owned subsidiaries apply for ERC?

it is possible, but generally, the parent and subsidiaries would be “aggregated” for purposes of determining if the entities qualify. Meaning, all of the financial information (and employees) would be rolled together (as if they were all one company) for purposes of qualification.

Can a business qualify for ERC within the same time frame he received the PPP 1 and PPP2 Loans?

Answer: Yes, it’s still possible. There is a calculation that’s done to ensure wages aren’t double counted for purposes of ERC and PPP proceeds that were forgiven.

If a business has more than 5 employees but all are certain family members, could they qualify?

Answer: ERC doesn’t apply to majority owner’s wages or to certain family member wages. Disqualified relationships to a greater-than-50% owner include the following:

A child or a descendant of a child;  A brother, sister, stepbrother, or stepsister;  The father or mother, or an ancestor of either;  A stepfather or stepmother;  A niece or nephew;  An aunt or uncle; and  A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

If a business started up in Aug of 2021 what is the protocol to qualify and can they qualify?

It may be possible, however most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021. So, given the window, it would be a nominal window of ERC credit even if they did qualify

Does what the employer paid employees affect the amount of the ERC?

The determination of the actual credit is based on Qualified Wages, which is a calculation of what was paid to employees over the affected period. So, if a business had many low paid employees, the credit may not be as high as a higher compensated employee infrastructure (e.g., medical office). The extent to which it makes a material difference will be dependent on how many quarters the business qualifies for and the year of qualification.

What if a business opened in 2021, can they qualify for the ERC?

It may be possible, however most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021. So, given the window, it would be a nominal window of ERC credit even if they did qualify

Is an ESOP structured company eligible for ERC?

The ERC is an employment tax credit, not an income tax credit, making many ESOPs eligible so long as they meet other qualifications.

If a business owner went to bankruptcy during pandemic, close the business but kept their EIN and all their documentation, they still can file for the ERC?

Bankruptcy does not prohibit them from filing for the ERC.

If you have a credit union which means all the members are “member owners” this doesn’t effect their ability to claim does it?

No it won’t keep them from filing for ERC

What if the client has the email regarding successful getting amount of PPP loan forgiveness. Can we use it instead of the PPP application?

We have to have three key pieces of info for PPP:

  • Loan Amount Forgiven
  • Covered Period
  • Amount of Forgiveness attributable to payroll use (as you know portion can be used for mortgage utilities etc)

Ask if client can provide this info.