Catherine Tindall is a CPA and partner at Dominion Enterprise Services, a specialty tax advisory practice. She always had a strong sense of a deeper purpose, and really being able to help other people. Catherine shares her insights on Employee Retention Credit so business owners can better understand how to take advantage of this generous program before the time runs out. The employee retention tax credit, otherwise known as the ERC, is a refundable tax credit in the United States, designed to reward business owners for retaining employees through the COVID-19 pandemic. The ERC is available to both small and medium-sized businesses.
Taxation is such a stressful thing for business owners to deal with. Dominion Enterprise Services focuses on strategic income tax planning and specialty programs. A lot of the work that is done is for other CPA firms who don't feel comfortable doing the ERC work because it’s such a specific niche. One of the interesting things about accounting and US tax preparation being so complicated is that it covers such a broad field and not all accountants come with the same knowledge.
Once you become an entrepreneur and earn multiple streams of income, you need to have a professional at your side who understands tax planning, instead of just filing forms and keeping compliant with the government. Catherine saw the gap in this particular program when people who are not tax professionals didn’t administer it correctly and lost 40% of their hard-earned income in federal and state taxes, even practitioners were too intimidated to approach it. Her firm started doing them and mastered what was coming down the pipeline.
Business owners need to understand that this interacts with their income tax and is not as clear as the PPP where you file pieces of paper with the bank. The mechanics of the ERC is a complex process that can end up being like the third round of PPP. It all depends on how many employees you had and how long they were employed.
To know if you qualify for the program, you need to have had at least five W2 employees during the pandemic between 2020 and 2021, along with access to quarterly financial statements like a revenue-based test and if you had certain revenue declines within quarters, you can qualify for it. Also if you were subject to government orders or mandates that forced changes in how you were operating. An example is when most restaurants were subject to state government orders that reduced their indoor dining capacity for a certain period during Covid, which caused a triggering event. The credit itself is capped at $26,000 per employee and when they do the legal footwork of the initial assessment and government orders, it can all be processed between three to four months and you can start receiving your returns in quarterly checks.
In this episode:
[02:40] Dominion Enterprise Services do strategic income tax planning and specialty programs
- Taxation is stressful for business owners to deal with and should be handed over
- You need to have someone professional at your side and understand tax in-depth
[04:28] Catherine saw the gap in ERC and found a solution
- People don’t administer it correctly and lose 40% of their income
- You can claim up to $26,000 per employee
[08:52] Make sure your accountant assessed you for ERC during 2020 and 2021
- Did you have W2 employees during the pandemic?
- If you had certain revenue declines within quarters, you could qualify for ERC
[12:01] Seeing if you qualify for all the quarters of the program
- Between 5 to 10 employees, you could potentially get a six-figure return
- Looking at government restrictions
[15:02] Catherine’s company was approached by a restaurant located in Massachusetts
- The client had approximately 15 to 20 employees
- How they qualified for $240,000 credit