18 Myths: Employee Retention Tax Credit

(See LINKS Below to Referenced Items)

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1. ERTC is over? No. Available on qualified wages from 3/13/2020 through 9/30/2021 (12/31/2021 if recovery start up business. IRS Notice 2021-20, 2021-23, 2021-49

2. Need to hire someone to help you?  No. This is straight forward and actually easy. My seminar shows you how to get, calculate and file ERTC step-by-step.

3. You can't get ERTC if you got PPP? Wrong. You can get both per the Appropriations Act enacted 12/27/2020. IRC Notice 2021-20 Page 12.

4. You can pay (charge) a contingency fee? No. Illegal per IRS Circular 230 Section 10.27.

5. You must experience a reduction of gross receipts AND be closed partial/full due to governmental shutdown? No. It is either/or. Only one event need occur. IRS Notice 2021-20 Page 7.

6. Self Employed Qualify? No. Not on their self-employed earnings. IRS Notice 2021-20 Page 20, Q&A #5.

7. If  you pay someone a Form 1099, you can use that to obtain ERTC? Wrong. The person receiving the Form 1099 is a self-employed individual, and does not qualify.  IRS Notice 2021-29 Page 20, Q&A #5.

8. If your customer is affected, you can qualify for ERTC? Wrong. IRS Notice 2021-20 Page 29 Q&A #13.

9. If your supplier is affected, you can qualify for ERTC? Myth in that your supplier must be shutdown due to governmental order, and due to that governmental order the supplier could not send you critical supplies that had a more than nominal affect on your business, and then only the dates it had an affect on your business, no more than the dates of the suppliers governmental orders; with a copy of the governmental order with proof that supplier couldn't provide supplies to your business because of the governmental order, with proof you tried to play orders that were unfulfilled and proof the supplies were critical and had an actual affect on your business.  IRS Notice 2021-20 Page 28 Q&A #12.

10. If supplier is the cause of your qualifying event, you qualify for the entire quarter? Wrong. IRS Notice 2021-20 Page 43 Q&A #22

11. Essential businesses don't qualify for ERTC?  Wrong. If their gross receipts are down accordingly, they qualify. Also, if they have a non-essential component of their operations that such revenues exceed 10% of the overall gross revenues, the entire business can qualify if there was a governmental order. Also, if aggregation is applied with multiple owned businesses, it may qualify.  It is not an absolute that essential businesses don't qualify. IRS Notice 2021-20 Page 27 Q&A #11.

12. You separate non-essential employees from essential employees?  NEVER, no matter the qualifying event for ERTC. IRS Notice 2021-20 

13. If a business is closed for any period of time due to governmental order, they qualify for the entire quarter? Wrong as only the qualified wages during the actual days of the shutdown qualify. IRS Notice 2021-20 Page 42 Q&A 22.

14. When determining if gross receipts are down, you compare 2021 to 2020?  Wrong, as you always are comparing the quarter's gross receipts to 2019; whether for 2020 or 2021. IRS Notice 2021-20 Page 44 AND IRS Notice 2021-23 Page 5

15. Full-time equivalents are applied when determining the full-time employee head count in 2019? Wrong, as you only include actual full-time employees.  IRS Notice 2021-49 Page 20.

16. Owners, spouses and relatives qualify for the ERTC?  Only if the constructive (aggregated) family ownership is 50% or less or only if the over 50% owner has no living relatives. IRS Notice 2021-49 Page 25.

17. ERTC has no tax affect?  Wrong, as it is a reduction of the wage deduction. IRS Notice 2021-20 Page 92 Q&A #60.

18. ERTC reduces the wage deduction when the employer receives the refund check? WRONG, as the reduction of the wage deduction is recognized in the year in which the wages used to obtain the ERTC were deducted for income tax purposes, which means an amended income tax return is required.  IRS Notice 2021-49 Page 24.