{"id":27339,"date":"2022-12-05T08:00:00","date_gmt":"2022-12-05T14:00:00","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=27339"},"modified":"2022-11-30T09:39:23","modified_gmt":"2022-11-30T15:39:23","slug":"what-to-know-while-helping-clients-with-the-erc","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/practice-management\/what-to-know-while-helping-clients-with-the-erc\/","title":{"rendered":"What to know while helping clients with the ERC"},"content":{"rendered":"\n

Since the Employee Retention Credit<\/a> (ERC) was passed in 2020, tax professionals and accountants have been fielding calls from clients who have heard or seen ads about the lucrativeness of the ERC. Despite the numerous bogus ERC claims based on misinformation, the ERC is<\/em> a legitimate opportunity every accountant should consider for their clients. Even if you don\u2019t offer ERC services yourself, you should still know what to expect when working with an ERC referral partner<\/a>.<\/p>\n\n\n\n

Educate clients about ERC eligibility criteria<\/h2>\n\n\n\n

Caught up in the hyped-up marketing of ERC mills, clients may approach you with a flawed understanding of the eligibility criteria for the ERC. For this reason, it\u2019s best to remind them that there are only two official tests for determining ERC eligibility:<\/p>\n\n\n\n

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  1. Gross receipts test<\/strong>: In 2020, a company must have experienced a decrease in gross receipts of at least 50%,<\/em><\/strong> when compared to the corresponding 2019 quarter, to qualify for the ERC. For 2021, a company is considered eligible for the ERC if its gross receipts decreased at least 20%<\/em><\/strong> during any quarter when compared to the same period in 2019.<\/li>\n\n\n\n
  2. Suspended operations test:<\/strong> If a government order caused your client to fully or partially suspend their operations for any period in 2020 or 2021<\/em><\/strong>, they may be eligible for ERC during that period. The ERC suspension test<\/a> involves many nuances and gray areas, which is why many ERC mills abuse it. It\u2019s best to hang on to articles and alerts about the ERC so you can easily and quickly educate clients about fact vs. fiction.<\/li>\n<\/ol>\n\n\n\n

    Gathering the appropriate documentation to support ERC eligibility<\/h2>\n\n\n\n

    Once you\u2019ve educated clients about the ERC, it\u2019s time to help them determine their eligibility. If they\u2019ve qualified for the ERC under the gross receipts test, they\u2019ll need to provide payroll tax returns for 2020 and 2021. In addition, you would want to obtain documentation related to wages used for the Paycheck Protection Program, if applicable, as well as amounts and dates for wages paid to employees during ERC-eligible quarters.<\/p>\n\n\n\n

    If they qualify for the ERC under the suspension test, gather and archive copies of local, state, and\/or federal government orders that specifically mandate the client to fully or partially suspend their operations. For supplier shutdowns, you\u2019ll also need copies of mandates that directly affect the client\u2019s suppliers, as well as proof that the client searched for\u2014and was unable to find\u2014an alternative supplier.<\/p>\n\n\n\n

    Avoid pitfalls with essential businesses and ERC suspensions<\/h2>\n\n\n\n

    If a client was deemed an essential business during the pandemic, you may still find ERC eligibility using the nominal portion or nominal impact guidelines described in IRS Notice 2021-20<\/a>.<\/p>\n\n\n\n

    Nominal portion: <\/strong>If only a portion of a client\u2019s essential business was suspended due to a direct government mandate, they may still qualify for the ERC if either of the following applies:<\/p>\n\n\n\n