FAQ
What’s the catch? This seems to good to be true!
No catch – this is legitimate. If you qualify, you qualify. Due to huge demand and an IRS backlog, it can take eight to sixteen months to receive your payment, so don’t start spending it yet.
Are we eligible if we received PPP or Shuttered Venue grants?
Yes! However, you can’t offset the same payroll twice. For example, if your quarterly payroll was $100,000 – and you applied for $80,000 in PPP forgiveness based on payroll during that period – you can only claim ERC against the remaining $20,000.
What’s the deadline?
ERC is claimed by filing amended payroll tax returns ( Form 941X). The deadline to amend payroll tax returns for 2020 is April 2024. The deadline to amend payroll tax returns for 2021 is April 2025.
We’re a non-profit and we don’t pay that much payroll tax! How could we qualify for a credit that is so much larger than our Employer Social Security Contributions?
The name of this program is confusing. The program was designed to provide a financial incentive to keep employees on the payroll despite the hardships caused by the COVID-19 pandemic. The ERC is a credit against applicable payroll expenses (including employer social security tax, qualified wages, and in some cases, eligible healthcare expense,) paid to employees during a time when your organization was impacted by the pandemic. The amount of credit your organization may be eligible for is not limited by the amount of payroll tax you paid.
If we receive the ERC, will we need to amend our annual returns (Form 990)?
The rules are unclear. The IRS has been clear that receipt of ERC does necessitate amending 1040 tax returns for for profit businesses and in many cases, for profit businesses will owe additional tax and perhaps penalties once they received their credit. The situation is different and unclear for non-profit organizations. Technically speaking Form 990s are “Informational Returns” not “Tax Returns” and in the case of non-profits, receipt of ERC will not result in a debt to the IRS. As of today, there is no definitive ruling on whether a non-profit that receives ERC for a prior year is required to amend their 990. Discuss this with your tax preparer, who may recommend that you amend your Form 990 after the funds arrive. I expect that the IRS will issue a ruling to clarify the expectations for nonprofits.
What is the process for determining if we’re eligible?
The process begins with a 20-30 minute discovery meeting via zoom. During this meeting, I will ask you questions about how your organization was impacted by the pandemic and will explain the program and process with you. These sessions can be scheduled via this link: Schedule a Discovery Session
If you decide you would like to work with me to explore your organizations eligibility for ERC, I will provide a consulting agreement and detailed instructions for the financial information we need to determine eligibility.
If the financial information you provide demonstrates a straight forward decline in gross receipts, I will then send a second set of instructions outlining the payroll and tax documents that will be needed to calculate the amount of credit your organization is eligible. At that time, you will also be asked to provide details from your PPP forgiveness applications.
If the financial information you provide indicates that your organization’s path eligibility for ERC is based on full or partial shut-down, it is likely that we will schedule another zoom session to explore the specifics pertaining to your organization’s situation.
Once we’ve determined eligibility and the amount of credit per quarter your organization is eligible to claim, I will prepare the amended tax returns to claim the credit for each applicable quarter. Once I have done so, I will request a final zoom session to go over my findings and explain the forms to make sure that whomever is signing on behalf of your organization understands the process and is comfortable with the amended returns.
Finally, when everyone is satisfied with the amended returns, I will provide you with final amended returns ready to be signed and mailed to the IRS.
How long does the process take?
Typically, we can complete the project within 3-4 weeks.
Once I have all of the materials needed to calculate eligibility*, I can typically get back to you within a week to let you know if your organization is eligible.
*Note that If your organization will be basing your claim on full-or partial shutdown by Government Order or Mandate, we can not determine eligibility until we’ve determined which Government Orders we will be citing in the claim and that the ability to provide that documentation is ultimately the responsibility of the organization.
The amount of time it takes to calculate the amount of credit due depends on how complex your organization’s claim is. Factors that impact the complexity include the number of employees, the number of PPP loans, the timing of PPP forgiveness and whether Qualified Healthcare costs will be factored into eligibility. Once I have all of the payroll, PPP and tax information needed to calculate the credit, we can usually wrap up the process within 2 weeks.
How long does it take for the refund to arrive?
Current IRS estimates are 8-16 months for the receipt of refunds based on amended 941X returns.
How much does this process cost?
The cost of your project will depend on the complexity of your organization’s claim. I am committed to keeping this process as affordable as possible for non-profits and to that end, my fees are typically no more than 1.5%-3% of the total credit claimed depending on how complicated your project is and whether you choose to pay a portion of the fee after receiving your first IRS refund.
As mentioned elsewhere, we offer a risk-free opportunity to determine eligibility. If we determine that your organization is not eligible for ERC, you will not be charged for our services.
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