Questions and Answers

Yes. As long as they have their own EIN number and between 5 – 500 full-time W-2 employees

The IRS considers an employee as being full time, for purposes of ERC, if they worked at least 30 hours per week.

Part time employee compensation is not considered part of “qualified wages” (which gets to what the refund is based on), so in effect they don’t generally count for purposes of the ERC.

Part time folks don’t work against you when it comes to the 500 limitation, but they also aren’t counted toward the minimum 5 if the business falls on that end of the spectrum.

There are exceptions to the “general” rule (and this is one of them) – which works around averages for purposes of qualifying part time folks in the aggregate. No individual part time person qualifies, but there is the potential they can in the aggregate when certain hourly thresholds are met. This is a bit subjective based on how the notice reads, but is an interpretation.

So, given this interpretation, it is theoretically possible to have a company qualify that is straight part time folks (to your question Brianne), but we just don’t see it often because it’s generally indicative of a smaller company that’s not hitting the hours it needs to co-mingle part-time folks together for purposes of the calculation.

Organizations described in section 501(c) of the Internal Revenue Code (the “Code”), and exempt from tax under section 501(a) of the Code, may be Eligible Employers for purposes of the Employee Retention Credit if they are employers that otherwise meet the requirements to be eligible for the credit

Yes. If they meet the guidelines eligible for the ERC.

ERC credit can be claimed by any eligible employer, which includes tax exempt non-profit organizations, even if they previously received PPP.

An eligible employer can claim the ERC on any qualified wages that were not counted as payroll costs in obtaining PPP loan forgiveness. So essentially, if the wages weren’t already counted in the PPP loan forgiveness, they can now be counted for the ERC. They just can’t be used in both. No “double-dipping.”

The ERC is technically 100% tax free per guidance in Notice 2021-20.

However, the IRS doesn’t like the idea that you previously took a deduction for employment taxes that you’re now receiving back (they call that double dipping) so those previous year deductions are disallowed, which (in effect) makes a portion of the ERC taxable (not technically, but practically).

The amount is determined by the refund size, entity type, and owners marginal tax rate (assuming pass through entity).

The client’s current CPA doesn’t have to sign off on anything to do directly with the ERC. The amended 941s are signed by the client and BrightPoint.

For amended return (for previous disallowed deductions) – their CPA is not opining on anything to do with ERC by way of amending a previous return, they are simply ensuring the employment tax deduction is accurate and aligned to what has been reported to the IRS. It’s a very simple amendment.

The CPA could always have the client sign a disclaimer if they’re that nervous about amending a return, or the client can find a new CPA.

Unfortunately, no. The business could still go back and claim a credit for the period in which it was owned by the previous owner, assuming they qualify, but the previous owner would not automatically be entitled to receive the refund. If it was negotiated that the previous owner gets a piece of credit with the current business owners, then of course an exception could be made.

PPP was the first two checks and made up mostly of what was available in 2020 for $5k or 15.2% of total available money of $26k. The first 3 quarters in 2021 represent $7k per quarter or 26.9%. So if a business qualified for 2020 and the first quarter of 2021, the most they would get is $12k or 46% of the total available ERC amount. There isn’t a way to say because you got PPP you only get X amount. It really depends on the type of business and where they are located and the local ordinances regarding COVID.

2020: 15 April 2024

2021: 15 April 2025

it is possible, but generally, the parent and subsidiaries would be “aggregated” for purposes of determining if the entities qualify. Meaning, all of the financial information (and employees) would be rolled together (as if they were all one company) for purposes of qualification.

Answer: Yes, it’s still possible. There is a calculation that’s done to ensure wages aren’t double counted for purposes of ERC and PPP proceeds that were forgiven.

Answer: ERC doesn’t apply to majority owner’s wages or to certain family member wages. Disqualified relationships to a greater-than-50% owner include the following:

A child or a descendant of a child;  A brother, sister, stepbrother, or stepsister;  The father or mother, or an ancestor of either;  A stepfather or stepmother;  A niece or nephew;  An aunt or uncle; and  A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

It may be possible, however most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021. So, given the window, it would be a nominal window of ERC credit even if they did qualify

The determination of the actual credit is based on Qualified Wages, which is a calculation of what was paid to employees over the affected period. So, if a business had many low paid employees, the credit may not be as high as a higher compensated employee infrastructure (e.g., medical office). The extent to which it makes a material difference will be dependent on how many quarters the business qualifies for and the year of qualification.

It may be possible, however most taxpayers became ineligible to claim the ERC for wages paid after September 30, 2021. So, given the window, it would be a nominal window of ERC credit even if they did qualify

The ERC is an employment tax credit, not an income tax credit, making many ESOPs eligible so long as they meet other qualifications.

Bankruptcy does not prohibit them from filing for the ERC.

No it won’t keep them from filing for ERC

We have to have three key pieces of info for PPP:

• Loan Amount Forgiven
• Covered Period
• Amount of Forgiveness attributable to payroll use (as you know portion can be used for mortgage utilities etc)

Ask if client can provide this info.