Whether you already filed for the Employee Retention Credit (ERC) or didn’t file certain quarters because you believed your organization didn’t qualify, there is a chance you may be missing out on additional ERC funds.
Due to the complexity and expertise required to field the legal and accounting aspects of the ERC claim, it’s critical for your organization to work with a qualified advisor who can ensure your ERC tax filing was done accurately and completely. With the right support, you can ensure your filing captures the total amount for all qualifying quarters and that all supporting documentation has been collected.
Sagemont Tax wants to ensure you have received the full credit in both quarters you have and quarters you have yet to file. Our expertise with the ERC allows us to clear up misconceptions surrounding filing, and we continually observe how taking a second look has made a substantial difference for a wide variety of businesses. We find that ERC is most commonly missed or done incorrectly because of unskilled advisors.
Here’s what you should know.
Has your business already filed with the IRS to claim ERC funds, but you think you might qualify for more funds or other quarters? There’s a chance that unclaimed credits are available for your organization, and you should consider having an ERC expert take a second look. On the accounting side, the ERC legislation includes complex rules on aggregation as well as PPP and ERC interaction, while on the legal side, you need seasoned attorneys to pull state and local orders and interpret how they may have applied to your business.
Misconceptions associated with ERC qualifications are why many businesses do not claim the full ERC funds they should receive. All too often, payroll providers or in-house CPAs may believe these misconceptions due to not having full knowledge about the intricacies of the ERC. However, most payroll providers or in-house CPAs are not ERC experts. A second look at your ERC eligibility could yield additional funds for quarters when you claimed too little or didn’t claim at all—even though you may have qualified.
There’s no harm in getting a second look if you’re not confident that you’ve received your full credit.
Many qualified advisors, like Sagemont Tax, will provide a free, no-cost evaluation of your ERC filings. An amended ERC filing could mean the difference between losing funds you’re entitled to and claiming a higher tax credit for your company. Given the current state of the economy and inflation, ERC has been a major lifeline to many small business owners.
Receiving the PPP and not filing for the ERC for those quarters, or not filing at all.
Some employers still mistakenly believe they cannot claim ERC funds in a quarter if they took out a PPP loan in the same quarter. While this was initially the case when the CARES Act was released, the rules have been amended so that small businesses and nonprofit organizations of 500 full-time employees (or fewer) can claim the ERC for Qualified Wages not covered by PPP loans. This is known as the no “double dipping” rule.
Failing to file for a partial suspension of business operations because of a lack of revenue decline.
If your organization suffered a full or partial suspension of business operations due to COVID-19 government executive orders, you may still qualify for ERC funds due to a business interruption, even if revenue went up during the periods for which you’re claiming. The full or partial suspension of operations is not a financial statement test, and therefore, a business is not required to have a revenue decline in gross receipts to prove the existence of a partial suspension of operations. For instance, many hospitals didn’t lose revenue but were forced to increase staffing due to the operational impact of the pandemic, despite adverse working conditions. Qualified ERC experts can help you measure this impact to determine your eligibility.
Believing you can’t amend or resubmit your form 941-x for previously filed quarters to claim additional funds.
The good news is you can both amend and resubmit. To amend your ERC filing, submit Form 941-X to the IRS for every quarter that you are correcting. Note: you can submit as many Form 941-Xs as you need; however, it will look suspicious to the IRS over time if you refile multiple times for a particular quarter.
Most organizations that have an ERC expert take a second look at their filings will receive more funds than they initially believed. They may have filed according to their understanding of the qualifying tests, which are complicated and easily misinterpreted. The insight of legal and tax experts with ERC experience can demystify the process and provide a granular understanding of different qualifying conditions under the legal test for the ERC.
There are a few scenarios to consider when you file for unclaimed funds or amend your ERC claim and file a new Form 941-X with the help of expert ERC tax, legal, and payroll advisors. Here’s a closer look at each.
If you plan to amend an existing ERC claim, you have already submitted a Form 941-X for each qualifying quarter and must submit a new one for those you wish to amend. Form 941-X is used for all ERC claims. It is meant to correct errors related to employee compensation reported on Form 941, including “employee wages, income tax withheld from wages, taxable social security wages, taxable social security tips, taxable Medicare wages and tips, and taxable wages and tips subject to additional Medicare tax withholding” according to the IRS. Each Form 941-X must be submitted within three years of the date the original Form 941 was filed. So, for example, for 2020, you initially filed in 2021, so you have until April 15, 2024 to file for those funds; in 2021, you initially filed in 2022, so you have until April 15, 2025 to file for those funds.
Inexperienced preparers often leave money on the table due to a lack of ERC expertise or a complete miss on an avenue of eligibility (most often, the partial suspension of operations test). A qualified ERC firm can double-check your previously submitted Form 941-X for common errors such as incorrect full-time employee count, misapplication of the PPP/ERC interplay, or failure to correctly apply the partial suspension test or other legal aspects of the ERC. ERC experts can help determine if these errors exist, evaluate your accounting and legal eligibility for all applicable tax quarters, and/or determine quarters where you may be eligible to receive a higher refund amount.
Chances are, if you didn’t use a qualified advisor, you are missing out on funds from the legal test and a possible misapplication of the gross receipts test. Because of this, many organizations don’t apply for all the quarters they qualify for and thus only receive a portion of what is available. With the help of a second look by a qualified advisor, your organization can determine if it qualifies for the ERC in quarters for which you have yet filed a claim. ERC experts will help you determine your eligibility and available funds for each unclaimed qualifying quarter and help you file with a new Form 941-X.
Note: If you’ve filed for ERC for all available quarters, you may not think you need a second look. However, qualified advisors can tell you if you’ve missed opportunities.
To ensure accuracy and adherence to the complex ERC tax code, it’s best to work with a firm of tax and legal experts specializing in the ERC. An experienced ERC firm can guide you through the process and ensure your filing is accurate and presents the lowest risk of an audit.
Sagemont Tax is an ERC advisory firm offering holistic ERC services backed by CPAs and legal experts who’ve worked at top firms nationwide. We offer tax and legal guidance to clients whether they’re filing an initial ERC claim or amending a previous claim. We stand by our work and take responsibility for our clients’ tax positions; our CEO and former partner at a top consulting firm, Kenneth Dettman, signs every ERC filing as the paid preparer. In addition, we provide a CPA-certified Eligibility Report that’s audit ready to provide our clients with peace of mind.
Through our Tax Refund Guarantee add-on service, qualifying clients can receive financial protection against IRS audits that lead to unfavorable adjustments for any claims prepared and filed by Sagemont Tax.
Here’s what Sagemont Tax client David Retiz, studio owner of YogaSix, had to say about his experience getting a second look with our firm:
“As a new business owner, COVID restrictions took a huge toll on my yoga studio. My retirement dream became grim through decreased membership and increased operational costs. My HR provider let me know about the ERC and that YogaSix would be eligible for a quarter. After talking to other YogaSix owners, I learned that my business may be eligible for additional quarters, and I was put in touch with Sagemont Tax. The team at Sagemont Tax advised that my business was in fact eligible for the credit for additional quarters, and they assisted me through the process of obtaining our credit of over $100k. Sagemont Tax walked me through everything, and although there is a lot of tedious paperwork, it was straightforward, and Sagemont Tax made it pretty dang easy. The ERC allowed me to avoid bankruptcy and pay myself back for the money I had to use to stay afloat during the COVID years – I tell all business owners I meet to look into the credit and learn more from Sagemont Tax.”
Need help amending your ERC filing? Learn more about how we can help you calculate, document, and claim your ERC. Contact us here or call 754-202-3055.
