The top ten mistakes made by business owners and tax advisors related to the Covid-19 relief funds approved by Congress include:
- Believing that a previous Paycheck Protection Program (PPP) loan or forgiveness disqualifies a business from applying for Employee Retention Credit (ERC) funds. This is not true, although the amount of ERC funds a business may be eligible for may be reduced if they have received a PPP loan.
- Assuming that a business must have experienced a 50% drop in sales to qualify for ERC funds. In fact, regulations have changed so that a 20% drop in sales or a partial or full suspension of business due to government orders also qualify.
- Believing that a business must have been completely shut down to qualify for ERC funds. Partial disruption or suspension of a business may also qualify.
- Thinking that a business that was deemed “essential” does not qualify for ERC funds due to the suspension of business. However, there are many factors that should be reviewed in this case.
- Assuming that a business that experienced a rebound in sales in Q1 2021 does not qualify for ERC funds. However, the Consolidated Appropriations Act (CAA) has multiple factors that may still make a business eligible for ERC funds.
- Believing that a business that grew during quarantine does not qualify for ERC funds. In fact, many expenses may still qualify.
- Thinking that a business without a tax liability or that was in losses does not qualify for ERC funds. There are many factors that are considered in this case.
- Assuming that a business with over 500 employees does not qualify for ERC funds. However, the ERC applies to businesses with fewer than 500 employees in 2020 and 2021.
- Believing that ERC funds are only available to businesses, and not to Indian Tribes, private schools, charities, non-profits, churches, hospitals, museums, and other entities. This is not true, as these entities may also be eligible for ERC funds.
- Not having proper documentation or working with a professional firm like Jorns and Associates CPAs, who specialize in documentation and offer $1 million in E&O coverage and 5 year audit protection.
It is important for business owners and tax advisors to carefully review the eligibility requirements and keep proper documentation in order to maximize their chances of obtaining ERC funds. Jorns and Associates CPAs offer a turn-key solution through their website www.ERCfastmoney.com, including a refundable retainer and proprietary software to help businesses determine how much they may be owed in ERC funds.
Jace T McDonald Native American Business Enterpeneur.