Join Kurt Schlup, Manager, and Dan Patterson, Senior Client Advisory Services Associate at PKF Mueller, for an in-depth interview on the Employee Retention Credit (ERC). In this episode, they provide insight into what the ERC is, what the maximum benefits are, the qualifications for eligibility, and the next steps if you are interested in receiving the ERC benefits.
[00:00:00] Ashley: Hi, I’m Ashley and you’re listening to “The Business Owner’s Guide Podcast: Tips, Trends, and Talks From a CPA.” Today, we welcome Kurt Schlup and Dan Patterson from our Client Advisory Services Department for a discussion on the Employee Retention Credit. But before we begin, let’s find out more about our guests.
[00:00:25] Ashley: Kurt is a Manager within the Consulting Team here at PKF Mueller. Kurt brings a wealth of knowledge to all projects, including 20 plus years of broad business-based tax experience.
[00:00:35] Ashley: Dan is a Senior Client Advisory Services Associate with six years of experience using QuickBooks and tax accounting software to prepare monthly, quarterly, and annual financial statements and tax returns for clients.
[00:00:45] Ashley: I just want to start off by thanking both of you for joining me today.
[00:00:49] Kurt: Thank you for having us, Ashley.
[00:00:50] Dan: Yeah, happy to be here.
[00:00:52] Ashley: So with that, let’s jump right in. Kurt, can you provide a brief overview of what the Employee Retention Credit is?
[00:00:58] Kurt: Sure. Well, first of all, the ERC is part of a broader law, often referred to as the CARES Act, uh, specifically is the Coronavirus Aid Relief and Economic Stabilization Act, the ERC in a nutshell, which was offered under the CARES Act, encouraged businesses to keep employees under a payroll versus the alternative, which would have been laying them off.
[00:01:24] Ashley: So now that we know what the ERC is, what are the maximum benefits?
[00:01:28] Dan: So the maximum benefits for this credit, when it was originally released in 2020 was $5,000 per employee for the whole year. So no matter how many quarters you qualified or what time period in 2020, you qualified for the max benefit was 50% of up to $10,000 worth of qualified wages, totaling $5,000 per qualified employee.
[00:01:53] Dan: In 2021, they changed that to $7,000 or 70% of up to $10,000 worth of qualified wages, and they changed that to on a per quarter basis. So the maximum benefit is $21,000 in 2021 for a total of $26,000 per employee, uh, as a maximum. So there’s, as you can see, there’s still a lot of funds out there to be, to be given to these small businesses who qualify.
[00:02:21] Ashley: What are some of the qualification steps for existing entities to determine if they are eligible to receive the ERC benefits?
[00:02:28] Kurt: Thanks, Ashley. I’ll take that question. There are three main ways to qualify for the ERC. The first is a government shutdown or otherwise known as a full shutdown.
[00:02:38] Kurt: This can, uh, come from any level of government, the federal, the state, county, parish, etc. The second way, which is more of a gray area is what’s referred to as a partial shutdown. The partial shutdown is where Dan and I spent a significant portion of our time and really helping clients navigate the nuance and understanding the facts and circumstances behind each client’s business.
[00:03:05] Kurt: The third way is often referred to as the gross receipts approach, which Dan kind of briefly touched down in the previous section.
[00:03:13] Dan: Yeah. And, uh, as far as gross receipts go, um, what you need to do is make sure that you, uh, had received a decline in gross receipts in comparison of 2020 to 2019 or 2021 to 2019. So in 2020, you had to prove that in, uh, comparing with a proceeding quarter in 2019, that there was a 50% decline and your gross receipts in 2021, they shorten that decreased to only 20%, uh, of a proceeding quarter with the base year of 2019.
[00:03:46] Ashley: As a follow-up to that, what are the qualification steps for new entities or recovery startup businesses that would like to receive ERC benefits?
[00:03:55] Kurt: Basically in order to qualify under this provision, you must not be able to qualify under the three previous, uh, areas, whether it be the government shutdown, the partial shutdown, or to gross receipts test. So assuming you don’t qualify under those three scenarios and you were formed right around February 15th, 2020.
[00:04:18] Kurt: You do not need to do a gross receipts test. The only test, the only requirement is that you must not have greater than a million dollars in total gross receipts for the period that you were in existence. So for example, if you form, you know, say, you know, Q2 of 20 and you’re in business throughout 21, you would take your gross receipts and average it over two years.
[00:04:44] Kurt: If that is clearly under a million dollars. You qualify as an RSB. The benefit is $50,000 in Q3 and $50,000 in Q4 of 2021. So a maximum of a hundred thousand dollars. Keep in mind that if you are an RSB, you do not get any, or you are not eligible for any benefit in any of the previous quarters other than Q3 and Q4 of 21.
[00:05:14] Ashley: With the popularity of the credit increasing, what impact has PKF Mueller had with their client base in receiving this credit?
[00:05:21] Kurt: That’s a great question. Ashley, Dan, uh, we currently have $33 million of verified credits for our clients and approximately, the credits range anywhere from $15,000, all the way up to, I think the highest thus far as about three and a half million.
[00:05:38] Kurt: So depending on your size and your situation, uh, depending on how many quarters you qualify for the credits can be quite lucrative.
[00:05:46] Ashley: If I were a new or existing entity that is interested in receiving the ERC benefits, what are my next steps?
[00:05:52] Dan: Great question, Ashley. I think your first step, if you’re a new or existing entity, that’s interested in seeing if you qualify for the employee retention credit, the first step would be to reach out to your PKF Mueller representative, to have a conversation with us, to see if you qualify. Um, we can take a look at your gross receipts by getting your quarterly financials.
[00:06:13] Dan: And we can also, uh, help you navigate through all the different mandates that happened throughout the past few years, to help determine your eligibility, and then eventually help you out with the calculation and the amending of the returns to receive the benefit.
[00:06:29] Ashley: Well, I think that was a really great overview, and thank you for your time today to explain the employee retention credit. If you are a new or existing entity interested in finding out more about the ERC Kurt, Dan, and the Team would be happy to speak with you and answer any individual questions you might have. Kurt and Dan, would you mind sharing your contact information?
[00:06:47] Kurt: Sure. Mine is firstname.lastname@example.org .
[00:06:53] Dan: And mine is email@example.com or feel free to give me a call at (847) 783 1917.
[00:07:04] Kurt: Ashley, we also have a general ERC team, email address it is ERCTeam@pkfmueller.com. Uh, if you reach out to this, usually somebody gets back to you within, within the hour.
[00:07:17] Ashley: And thank you to our listeners. Don’t forget to visit us at pkfmueller.com to learn more about our Firm’s services. You can also follow us on social media for more updates, insights, and upcoming events.