Have you looked at your inbox over the past year and noticed that you have been swarmed with third-party companies stating that you could potentially claim millions of dollars of the Employee Retention Credit (ERC)? Sounds amazing, but is it too good to be true?
In March 2023, the IRS issued a warning stating that there are third-party companies aggressively misleading organizations into thinking that they are eligible to claim this credit. Therefore, it is very important for these organizations to review the ERC guidelines carefully and to seek out advice from their tax advisors to understand if they qualify or not. Afterall, organizations are fully responsible for what is reported on their tax returns, and incorrectly claiming the ERC could result in the organization not only having to repay the credit received, but also penalties and interest. Let’s not forget the fees they would have already paid the third-party companies that misled them in the first place.
How does an organization qualify for the ERC, you may ask? Well, it depends on if you are looking at the 2020 or 2021 calendar year. For 2020, any organization whose operations were subject to a full or partial suspension of operation due to a mandatory government shutdown, or who experienced a 50% decline in gross receipts from all sources during a calendar year quarter when compared to the same quarter in 2019 calendar year, may qualify. For 2021, any organization whose operations were subject to a full or partial suspension of operation due to a mandatory government shutdown during the first three calendar quarters, or who experienced a 20% decline in gross receipts from all sources during a calendar year quarter for the first three quarters when compared to the same quarter in 2019 calendar year, may qualify. Please note, an organization may qualify for both calendar years and only qualified wages paid after March 13, 2020 and before January 1, 2022 are eligible for the credit.
Another issue to think about with the ERC is the No Double Dipping rule. If you are a healthcare organization, you most likely qualified for Provider Relief Funds, American Rescue Plan Act funds, the Paycheck Protection Loan, and the list goes on. There is a high chance these funds were used to offset payroll costs. The government, like all organizations, does not want to pay for the same expense twice, so organizations need to ensure they are in compliance and not at risk of returning any of this funding.
If you want a second opinion on that seemingly too good to be true ERC or whether or not you are at risk for double dipping funding, McKonly & Asbury’s experienced professionals are here to help. Learn more about McKonly & Asbury’s Healthcare Practice by visiting our website or by contacting the Healthcare Practice Director, Janice Snyder, Partner.