In March 2020, the Employee Retention Credit (ERC) was established to assist businesses that suffered economic impact, financial losses, or operational disruption during the COVID-19 pandemic.
Are you curious about how these credits could benefit your business? Here are some common questions employers have about the program, requirements, and other aspects of the ERC.
There are two methods to determine ERC eligibility:
As our CEO and founder Kenneth Dettman says, “We typically aren’t seeing full suspension of operations outside of that core shut-down period of March, April, May of 2020. The overwhelming majority of the analysis we are looking at today are mainly dealing with a partial suspension.”
When the CARES Act was signed into law at the end of March 2020, the Employee Retention Credit was a major component of the act. At the time, the most a company could receive was $5,000 per W2 employee. This was expanded for the 2021 tax year through additional legislation, which allowed a qualified employer to receive up to $26,000 per W2 employee.
According to Willis Towers Watson, a firm that helps clients with tax concerns, “Tax liability insurance is designed to transfer a known but uncertain risk arising in your transaction, fund or business to an insurer’s balance sheet. The insurance indemnifies the policyholder from financial loss arising from a successful challenge from a tax authority, removing uncertainty around potential tax liabilities.”
And with the Employee Retention Credit, Dettman says there’s a high-risk profile for claimants that attempt to file without experienced tax and legal professionals, especially for the uninsured. “We believe that tax insurance is a solution that can transfer risk. By going through the tax insurance and underwriting process, you can feel more secure in your claim and limit the amount of risk that your organization would assume.” With an appropriate protective policy emplaced, tax insurance shifts the audit risk from the taxpayer to the insurance company, limiting exposure to liability, fines, and other repercussions.
Because of Sagemont Tax’s exceptional credentials and extensive industry experience, an A+ rated global insurer entrusts us to refer preferred-ERC-claimants to their ERC tax insurance program, provided that the ERC exceeds $500,000.
Simply put, tax insurance transfers the risk and counteracts the IRS warnings and ERC Mill narratives. It gives you financial security and peace of mind to redirect your focus where it really should be—on your business operations.
How exposed to risk are you by the complexities of the ERC? It is important to understand how you could leverage the benefits of insurance when analyzing the risk associated with Employee Retention Credits.
Some of these considerations include:
In order to successfully secure an Employee Retention Credit, it is wise to have thoughtful and well-documented substantiation and eligibility reports. The framework for the documentation needed to satisfy an audit/review has been clearly laid out by the IRS:
Partial suspension substantiation is a more nuanced process when filing for the ERC. We have developed five takeaways to consider when substantiating a partial suspension. These include:
Want to learn more? Download the Practical Guide to Navigating an Employee Retention Credit.
Like any taxation policy, there are good candidates and bad candidates for Employee Retention Credit insurance. Here’s a quick guide to determine if it might be beneficial for you to explore the process.
Sagemont Tax has assisted a multitude of companies with their ERC tax liability concerns. A few brief examples include:
If you have more questions about how your business might benefit from receiving the Employee Retention Credit, check out the FAQ on our website.
Sagemont Tax has pioneered a streamlined program to provide employers with access to A+-rated tax liability while also delivering lower minimum coverage amounts and reduced premiums on your ERC claims.
Contact us and let us know how we can help you!
For more information on the ERC, tax insurance, and IRS substantiation, watch the following webinar.