ppp and erc

[rivkah]

I last week I had a meeting with a Paychex Rep, they are offering a filing of PPP and ERC to employer with payroll who did not take credits on 941 forms or get the PPP loan, claiming rather large refunds.  Also, saying that the business did not have to experience a reduction in overall revenues, but only a major change in the way buisness was conducted.   This I did not know.

During this meeting we talked about a specific cleint of mine that has been doing their own payroll for decades, with no intention of signing on to a payroll service.  Of course, I was excited about this since I know that this client has been struggling to maintain revenue stream and any additional influx of cash would be most helpful.  Based on the conversation (rep with his manager), it appeared as though Paychex was adding another product/service line.

I filled out the initial questionnair on behald of my client, was told that they qualify.  I then asked about fees and time line......  

Today, Paychex says ... only for Paychex customers.  I am frustrated, bordering on angry.

So..... does any one know about this?  Applying for tax credits because of the change in business proceedures?  Can someone point me in the right direction to apply for this on behalf of my client?  Has anyone applied for this?  What is the proceedure?  And a whole bunch more questions I dont know to ask

Thank you in advance for your kind attention to my questions

[sjrcpa]

irs.gov has a lot of info the ERC.

It's a bit narrower than a "major change in the way buisness was conducted" but your client could qualify.

And the rules are different for 2020 and 2021.

[rivkah]

 I looked through irs.gov for ERC.... maybe I am missing something, but can you be more specific?

[sjrcpa]

Use Employee Retention Credit  as your search term.

[rivkah]

 have done that.... I have been all over the web and throughout irs.gov... before I listed my questions here.

I have found contradictory definitions as to what is a qualifiying business.

Generally, saying if there was a government mandate shuting down or limiting commerce.... then a company qualifies.  I have seen "essential businesses" do not qualify, but have also seen on IRS website and example using a grocery store, an essential business, for calculating qualified wages.  

My client is a Vet office. Her revenues fell 10-15%.  She did adjust all her proceedures to continue operating: no owners were allowed into the building (pets were collected by a vet tech from the vehicle), currently, only one owner allowed in the waiting room at a time, but still not allowed into the exam rooms.  Does she qualify because of this?

No amount of additional googling is giving me this answer.  I probably will have to do what I dred most -- calling the IRS.

[sjrcpa]

Calling the IRS is useless and a time waster. You cannot rely on what they tell you over the phone.

I found plenty of info at irs.gov. You can also read the Internal Revenue Code Sections and the Rev Procs and Notices put out by IRS.

Sounds like you are unable or unwilling to do the necessary research. In this case, I would refer the work elsewhere.

[rivkah]

I absolutely agree with you, calling the IRS can be a waste of time.  And sadly, sometimes asking for assistance here can be also.

I guess I should have listed everything I have read during the past couple of days, IRS codes, publications, etc, and websites I visited, as well as a couple of the local accountants I have spoken to, but I believed that would be another waste of time - both for me to list and for someone to read through.

If you did not have an answer, constructive answer, why respond?

[rivkah]

First, let me apologize for being snippy, but...

It still shocks me when an accountant is looking for an answer to something and finally asks the community instead gets a long story about someone else who asked the same question but without giving an answer to the question, or my favorite non-answer "just google it". 

Generally, questions are asked here because either all other resouces have been exhausted or maybe there is just a mental block and the "answer" is just not seen or missed.   

[dkh]

Have you read through this ?   https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

[dkh]

Maybe something in here will help  https://www.adp.com/spark/articles/2021/01/irs-guidance-on-how-to-claim-the-employee-retention-credi...

[TaxGuyBill]

---

@rivkah wrote:

 to employer with payroll who did not take credits on 941 forms

---

That is done on amended 941s.  So the largest source of information is to read the Instructions for 941.  Have you done that?

https://www.irs.gov/pub/irs-prior/i941--2020.pdf

https://www.irs.gov/pub/irs-prior/i941--2021.pdf

https://www.irs.gov/pub/irs-prior/i941x--2020.pdf

https://www.irs.gov/pub/irs-prior/i941x--2021.pdf

(On the links for 2020, you need to look on the left side for the Instructions for various quarters.  If it does not show up, then try a different internet browser or download the file and open it with Adobe (NOT your internet browser).

[abctax55]

These guys have many 'free' webinars on ERC (many of which I took two years ago...)

https://www.cpaacademy.org/search_webinar

[rivkah]

@TaxGuyBill , @abctax55 , @dkh 

Thank you so very much for all your efforts on my behalf.  I have read through those items which you had linked, in fact I must have printed out 1/2 ream of paper to re-read and highlight.  There is a lot of information out there... and the rules for 2020 are different from 2021, which makes it all more mind boggling, keeping it all straight.

I admit when preparing income tax returns (1040, 1120, etc), I will put my toe on the legal line, but never cross it...  occassionally, have leaned way over it.   The nature of tax does lead to "interpetation" and, of course, searching for loopholes and gaps. 

But this could lead to jeopardy if I get it wrong.  And I am having a hard time trying to determine if this small vet client even qualifies --- contradictory information about whether or not an "essential business" qualifies at all (2020 vs. 2021).  What is the meaning of  "fully or partically shut down" under "govenment mandate" ?  Depending upon what you read or to whom you speak with...  "partical shut down" might mean that the Vet Client, which still operated, but who completely changed their method of operation, qualify.  Example I was given: a restaurant who no longer had indoor seating, (only take-out) qualifies, even though their revenues increased. But, a restaurant is/was not an essential business... the Vet clinic is/was.  

I have already stacked on my desk all the information and forms to do all the necessary amendments. Doing the amendments is just boring and tedious.  It's the underlying assumption I am having the problem with. Does the Vet clinic even qualify?

Any opinions?

[TaxGuyBill]

As was mentioned above, the rules changed several times so you need to look at each quarter's rules.

If you don't usually do payroll, it really is in the best interests of your client if you refer out this to somebody that is already knowledgeable about the rules.

[sjrcpa]

You're welcome. 🙄

[rivkah]

Their payroll is very straight forward and most payroll changes do not affect them.   The client has been doing their own payroll since inception, although I prepare the quarterlys and the year end forms.  8 total employees including the owner (s-corp -- owner wages are not qualified for ERC), 6 part-time, 2 full-time.  No 401s, no company medical insurance, no paid sick pay, etc.  Truly, their payroll reporting does not get any eaiser.  Which makes the amendments basically just boring and tedious.

This is just not a big or complicated company, but thank you @TaxGuyBill  As far as the ERC, I have already printed all of that out and have familiarized myself with the requirements and proceedsures and understand the differences between 2020 and 2021.

[rivkah]

For whatever its worth, my initial questions had nothing to do with how to do if, but rather, what is the meaning of "fully or partially shut down".  This is open to interpetation.  Was the Vet clinic "partially shut down", when they reduced their hours?, Or when then stopped allowing owers into the building with their pet?  

[TaxGuyBill]

---

@rivkah wrote:

 what is the meaning of "fully or partially shut down".

---

You might be missing part of that ... it is "fully or partially ... due to a government order".  Did the government restrict things?

This IRS page has some FAQs about that topic.

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-when-an-employe...

[linette]

I like you have struggled trying to find clear answers and get frustrated that non-techinical people such as Paychex are offering services trying to gain clients and fees without making sure client qualifies.

I have been asked to review this as well.

First thing I see is that they cannot take credit for wages that were used to satisfy PPP loan forgiveness.

This is different than originally stated.  Originally they couldn't take the credit if they received PPP loan.

My starting point is going to be to look at wages and what was used to satisfy the PPP loan forgiveness.

Then go from there if anything is left.

With my clients the majority of expenses used to satisfy forgiveness were payroll.  So it is possible there is little left to apply towards this credit.

Good Luck and share if you are able to figure something else out.

[rivkah]

I am so sorry... yes, I was aware of that, and yes, the state did restrict indoor access, only recently lifting some of them.  

(I was actually shut down for a couple weeks until the State decided that I was "essential")

[rivkah]

The section in the link that you provided in part of the 1/2 ream paper that I had printed.

The vet closely resembles the Example 4, employer H, hospital.  In addition to not allowing owners into the clinic, the clinic was also forced to suspend certain "normal" animal care such as annual shots and exams and certain surgeries, unless truly needed, very much limiting the services offered. 

By the way, what I miss most since leaving the corporate world, i the conversations/discussion, sometimes heated, about tax codes, accounting, interpetations and discussing loopholes and gaps.

(I sold my shares of the cpa firm I started and "retired".  I am too young to retire and  am not qualified to do anything but what I do... so... I file in 21 states and 4 countries.)

I really do appreciate all of your efforts on my behalf

[rivkah]

@linette 

One other thing to look at is:  the wages of the owner(s) of the business  (S-Corp, partnerships, etc) do not qualify for ERC.  I beleive it is owners with 80% or more, but i will have to check my notes on that.

And because there is also the requirement that the "total or partial shut down" must be govenment mandated, business in certain states would not qualify.  Off the top of my head: florida and texas, which had no mandates.  But, looking through IRS determinations, if a supplier was shut down and that shut down impacted a company that was not shut down, that company may be consider partially shut down for ERC purposes, but there still needs to be in place a govenment mandate even if the mandate did not specially target that company.  Yep... confusing.

Also, 2020 and 2021 have slightly differing requirements and calculations, so keep an eye out for that. (hint: use different colored highlighters)  

Thankfully, in my case, I dont have to deal with PPP loans, so its much more straight forward.

Yes, my first throught about paychex was that this was a new service line, but that is not the case.  Its a marketing tool.  I think I might have gotten a little indigant about the marketing tool and  was given the option to sign up my client for payroll service, they would then do all the amendments, charge $7,000, then after the client receive their refunds, they could cancel the payroll service.  Paychex also is claiming that local accountants are preparing the amendments for their clients and charging 25-30% of the refund. I guess, to convience companies that Paychex is the better deal.

[linette]

Next thing to wrestle with:

If credits are taken there are wages that can't be deducted on the tax filings.

I believe even though we are filing for those credits now, by doing so, taxpayer will have to amend their business tax filings to remove those wages.

Is this really worth it?

[rivkah]

Depends.

Since I am dealing with a S-corp, those returns would be amended, and amending K-1, which would in turn amend the personal returns (fed and state) of the owner (100% shareholder)

In the case of my client, yes, it is worth it.   The amount they might receive is greater than the tax effect on the owner's personal returns combined with my fees.

But since you are also dealing with PPP loans and therefore might not necessarily have a goodly amount of wages against which to use the ERC, the effect might be minimal on the corporate return. But, it would still need amendment.  And the personal returns, if partnership or S-corp.

It is one of those: have to do the calculations to deterimine the impact to be able present to the client to deterimine if it is worth doing. (dont forget to factor in your fees, which would then be deductible in 2022).  Almost a circular calculation.

[qbteachmt]

"It still shocks me when an accountant is looking for an answer to something and finally asks the community instead gets a long story about someone else who asked the same question but without giving an answer to the question, or my favorite non-answer "just google it". "

Well, this is a ProSeries User Group. The questions for using the program have nothing to do with Payroll Provisions. So, being mad when you ask the wrong crowd, won't help anyone.

There are lots of places via the web to find the info, and this also is why you would join, for instance, a professional organization and take a continuing education class or get their literature or find info specifically for PPP and ERC, because those provisions are narrow in scope, changed due to enactments, and are specific to each of your clients.

We saw earlier that there are service providers doing this for a fee. You can make a business of it. You will need to understand the variables that apply. Everyone that tells you this is trying to give you the guidance you seek. No one on the web can be your consultant to your payroll question. This is why providers are making offers to submit this for clients. If you want to be one of these service providers, fine. Don't get mad at the people here, when you asked an Income Tax Preparer group for using Pro Series, about the specifics that apply to your client's payroll. Pay attention to the statements being made.

Play nice on the internet.