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Employee Retention Tax Credits
Episode 1026th July 2023 • The Miller Law Chronicles • Attorney James Miller
00:00:00 00:28:42

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Join us on The Miller Law Chronicles as we discuss the Employee Retention Tax Credits, a legislated lifeboat for businesses in the aftermath of the pandemic. This episode features seasoned tax expert, Attorney Robert Hoglund, providing vital insights into this complex law. We'll explore eligibility, application, and tax implications, aiming to equip you with crucial knowledge to safeguard your economic well-being. Don’t miss this episode; it could be a game-changer for your business in a post-COVID world.


Atty. Jamie Miller: [:

We talk about all kinds of different things affecting people and affecting the law. But today, I'm really excited about talking to one of the expert lawyers handling employee retention tax credits. Congress and the IRS several years ago as part of the COVID legislation gave us the ability to get tax credits on wages that were paid to employees for the last three quarters of 2020 and the four quarters of 2021.

a tax credit that can be up [:

So, I'm really excited about welcoming my friend, Robert Hoglund, to the podcast. And I hope it's great information from you and information that you're able to share with your businesses, with your friends, with anyone that has, is self employed. Thank you again.

loyee retention tax credits. [:

Attorney Robert Hoglund: Just fine. Thank you, Jamie. And thank you for having me on your program. Very honored to be here.

Attorney Jamie Miller: My pleasure. And I want to jump in and start talking about the employee retention tax credits, but give me a little bit of background about who you are, you know, the type of law practice that you've built and how you got into handling employee retention credits at this time.

at. I founded our law firm in:

And particularly I've been solely practicing Tax Law relative to the employee retention tax credit for several years now. I've become very familiar with it and all its twists [00:03:00] and turns over the years. Thank you.

Attorney Jamie Miller: Yeah, yeah. Tell me a little bit about the employee retention credits. What they are and what got you interested in starting to work in this area.

Attorney Robert Hoglund: Sure. Well, I've helped a lot of small businesses over the last 32 years relative to tax laws that relates to consumer bankruptcy or business bankruptcy issues. And several years ago, I found out about this opportunity with the Employee Retention Tax Credit and with some of my tax background, I felt it would be a good fit for our firm and a lot of opportunity relative to giving small businesses, you know, good, solid legal advice relative to qualifying for the Employee Retention Tax Credit.

Attorney Jamie Miller: And what exactly is the employee retention tax credit?

e. Well, it's an opportunity [:

And it's for individuals, small businesses that have been affected by COVID mandates either their net profits, their revenues, their staff, their employees or otherwise. And it's a very good opportunity for some businesses as long as they're, you know, it's a good fit for the company and they have a good, solid claim.

s? Does a company have to be [:

Attorney Robert Hoglund: Well, it's for any small business that has an EIN number that has hired and had W-2 employees for 2020 and 21, two or more, that were affected by COVID mandates during that period. And there are two tests to determine the qualifying factors. Relative to the employee retention tax credit.

employees [:

Now, to qualify for those tax credits on those wages you paid your W-2 employees for that period, you look at, again, the Revenue Reduction Test. That's one test you can use, and you can use one or the other. And the second test is called the Nominal Business Impact Test.

t first started back in early:

And the reason that they did that is that they had a lot of money set aside [00:07:00] to pay out to small business owners. And they found that the tests that they had, the IRS had these guidelines from the beginning were a bit stringent. So they kept opening again up that funnel. One of the things that they did is they added the nominal business impact test as a second test about, oh, I think a year and a half ago.

And so a lot of folks that I get phone calls on have been told they didn't qualify. And they were given that opinion under the guise of older, more restrictive rules and guidelines. And now those guidelines have opened up and they do qualify. Particularly the PPP loan. Or they've been told if you're a non profit, you don't qualify. Well, you do qualify if you're a non profit as well. Or not for profit. Go ahead, Jamie.

Attorney Jamie Miller: Sure, and the nominal business impact, what does that look like? And when you're talking to potential clients? What does that mean? What are you looking for? What type of questions are you asking the business owners?

Attorney Robert Hoglund: [:

So it's kind of a problem effect, problem, effect, problem, effect. As you go down these 15 or 16 bullet points we have and each of these bullet points, the effect has to be whether there was a covid mandate, a rule, not a guideline, not a recommendation, but a rule that these companies. Owners, employees, vendors, customers, clients would have had to follow that would have, adding up all these bullet points, is it slightly more than a nominal impact, business impact on their organization or [00:09:00] their business.

And that test is an art in itself to put together. Not many accounting agencies even, you know, CPAs or otherwise even touch this test. Usually they do the simple math on the gross receipt reduction test, which not many businesses qualify for.

of the last three quarters of:

And you apply that test quarter by quarter by quarter. So it's not an all or nothing thing under the nominal business impact test. Again, you take a [00:10:00] look at each of the six quarters that a business could qualify and apply those 15 or 16 problem effect COVID bullet points from the nominal business impact test to their business during that period.

And there are some companies I've met that under the nominal business impact test, they didn't have any quarters that I felt comfortable relative to qualifying. Some businesses had a couple three quarters they were affected more than nominally and some businesses. Got, you know, absolutely walloped all six quarters.

rst quarters two and three of:

Attorney Jamie Miller: Yeah. So you said quarter two [00:11:00] and three of 20 in all four quarters of 21. Is that the period of time?

or the last three quarters of:

And sometimes you can get fourth quarter 21 too, if you're a startup. So there's an exception to that rule, but that's a whole different discussion in itself under startups.

Attorney Jamie Miller: And I talked to businesses that are considering filing for the tax credits. And they'll say, you know, like I was a law firm or. I was a grocery store or some other type of business that, you know, was deemed to be essential.

. They were able to continue [:

Attorney Robert Hoglund: Yes. And that's the nominal business impact test is this, that was the business nominally impacted or just above nominally impacted. That's the rule and they don't have to be closed. They don't have to be a non essential business, but those bullet points that I was talking about where we've, you know, boiled down the IRS guidelines, all these bullet points they're like death by a thousand paper cuts.

the nominal business impact [:

Attorney Jamie Miller: Right. And I talked to another business the other day and they say, yeah, I didn't, I got my PPP money and the payroll protection money, and I continue to operate my business. And I don't feel great about applying for the ERTCs because. You know, my profitability is still there, my revenue is there, it was down, but what would you tell to a business owner that's like, weary about going and applying for these tax credits?

s you're asked that question.[:

And that relates back to those bullet points under the nominal business impact test. And at the end of the day a lot of small business owners going through the bullet points under the nominal business impact test PTSD or otherwise. They realize how much they were impacted.

Now, the nominal business impact test really doesn't have anything to do with the gross receipts. Really, it's, you know, how much more in gross receipts for a small business would you have had? But for those covid mandates during that period, now, what I like to see.

Attorney Jamie Miller: That's a huge point, so it's not just a drop in revenue or a drop in profitability. It's about potentially, you know, lower profits because of the impact that COVID rules had on them.

ing money more than they did [:

And revenues comparing 19 to 20 and 19 to 21, which most businesses had in that respect. So even though the nominal business impact test has not much to do about the gross receipts at that time, I'd like to see a flat line or at least a slight reduction. Because that tells a story that really adds into the story about how these businesses had, you know, future growth potential and they got hammered with the COVID mandates.

Attorney Jamie Miller: Right? So why is the government doing this? What's the purpose? What are they trying to accomplish?

hat is for employers to keep [:

Attorney Jamie Miller: Right. And it's, you know, they want to keep money kind of in the economy, you know, it's to keep the economy going and keep things, you know, moving forward, I would think is another. Kind of reason that they want to do this.

Attorney Robert Hoglund: Oh, for sure. Yeah, and there's a myriad of, those funds back into the economy. Into small businesses for grow or maintain or stay healthy or, you know, improve this in their building. Or, you know, there's just a myriad of advantages to keeping the economy healthy in that respect.

n is. How much am I going to [:

Attorney Robert Hoglund: Well, based on our past experience representing small businesses under the employee retention tax credit typically what I tell clients, and I think I'm pretty darn close. Is, you know, usually we get about $15,000 per employee part time and or full time, give or take 20%.

these small business owners, [:

Attorney Jamie Miller: It's a significant amount of money and what is the tax impact of getting a credit like this.

Attorney Robert Hoglund: Well, unlike the PPP loan, which in most states are forgiven without any tax consequences you do have to pay taxes on any funds you receive under the employee retention tax credit. And you do have to go back and amend your corporate returns for whatever years that you received refunds for quarters in the years that you made the application for.

And it's not a hard amendment, but you do have to pay taxes and oftentimes that too could flow back into the K-1 and personal returns of the business owners. I typically work with the accountants of small businesses relative to making sure that they're aware of this claim.

't had any accounting firms, [:

Attorney Jamie Miller: And does the government hold back any of the money to be applied toward taxes or the businesses get the full tax credit?

Attorney Robert Hoglund: The businesses get the full tax credit, and in most instances, also what they're going to get is interest. Now, I tell my clients, don't be too excited that you got interest on this, because when you go back and this is really weird, but when you go back and you amend your tax returns for the years that you've received the refund in per quarter.

e taxes is about half of the [:

Attorney Jamie Miller: I'm, right, like many opportunities for businesses, it seems like the vultures are really swarming out there on Facebook, on you know, just different Google ads. The radio, the TV about companies that will try to get those retention credits for you. And can you tell me a little bit about if we as consumers and businesses should be concerned about calling an 800 number like that to. Yeah get assistance with this program.

oglund: Well, I can tell you [:

If you go to IRS dot gov under the RTC site, I think there's no less than three warnings that the IRS has put out there to be very, very cautious of these companies that purport to be ERTC experts that are not CPA firms, they are not tax law firms.

s. With a truck and a shovel [:

Attorney Jamie Miller: Right? And when you apply for these tax credits, how long does it take to actually get the tax credit?

Attorney Robert Hoglund: I tell clients about 4 to 12 months, give or take, you know, it takes a while. Now we can, you know, typically turn a good claim around and get it filed within several weeks. And then once that claim is filed, because in order to get the credit, you have to amend your 941 tax returns for whatever quarter that you're choosing or feel the client is eligible for, and then file that with the IRS.

And then usually once they're filed, I tell clients about 4 to 12 months, you can expect a check per quarter from the IRS relative to the employee retention tax credit.

The laws in this area in the [:

So what if I apply for a retention credit and then get my money and then six months from now I get audited? How, are you able to help with that or what's the situation with that?

Attorney Robert Hoglund: Yes we do. We would help. You know, I haven't knock on wood. I haven't had any audits or inquiries yet from anybody we represented. I suspect we will, but one of the things that I do when we meet with clients is not only do we make sure that qualify under the gross receipt test or the nominal business impact test.

at documentation you need to [:

Attorney Jamie Miller: Yeah, that seems like really good advice. And the, you know, it's already, it's, you're kind of saying that we can get the credits for the time period is 20 and third quarter ending in 21. We're already, you know, almost to the third quarter of 23.

How much longer do potential businesses have to be able to apply for this credit?

et the last three quarters of:

Attorney Jamie Miller: So there is you know somewhat urgency, to take care of this sooner or later you'd hate to wait until april of 24 and then not be able to get the credits that you deserve for at least tax year 2020, right? So it's important to to get on this.

an individual could have from:

Attorney Jamie Miller: Do you see any rumblings? At all that the money could run out or that they'll reverse you know, kind of the guidance and take this opportunity away?

concerning. I really didn't [:

I haven't heard anything else, to the best of my knowledge that the employee retention tax credit will end sooner than anticipated or be underfunded or otherwise. But it's the federal government, you just don't know.

Attorney Jamie Miller: Right. And, what's the best way to reach you? If someone had questions or wanted to talk to you about the employee retention credits.


Attorney Jamie Miller: Yeah. Robert and I have [00:27:00] forged a partnership. My area of expertise is not in being a TATS lawyer and I'm smart enough to know to go to the experts for my clients. As long as they get calls for many areas of the law that I don't practice and I've just really excited. And I know Robert's helped clients of mine and done it, done a really good job.

With it and always does what he says he's going to do, which is the mark of a really good business person and a good lawyer. I really appreciate you taking the time to talk about this really important topic. And there's a lot of great takeaways from this information that you've provided.

Just want to wish you a good day. Thank you so much. And you and I will be talking quite a bit in the future as we go down this path to helping our clients get their employee retention tax credits.

very cautious, careful look [:

And Jamie, I thank you for everything that you've done for me today to allow these viewers to get a, I think a very accurate the synopsis of the employee retention tax credit and what's out there and available. Thank you so much.

Attorney Jamie Miller: Sounds great. Thank you so much, Robert. Have a great day.

Attorney Robert Hoglund: You to take care.