Lately, we’ve been hearing from our clients that they are concerned they may be missing out on the pandemic related Employee Retention Tax Credit (ERTC) from either social media channels or email campaigns from newly formed ERTC mills.
During the last 2 years, we’ve processed a lot of ERTC requests. There are 3 ways your business might qualify for the tax credit. 1) Direct government shut down or restriction of hours of operation or capacity, 2) significant revenue decline when 2020 and 2021 are compared quarter by quarter to your 2019 results 3) and finally, supply chain disruptions.
Most of the recent discussion from the ERTC mills has centered around the “Supply Chain Disruptions” alternative. At first glance it seems that every business should qualify. Nearly all businesses felt some disruption of the flow of goods, so on the surface it feels like nearly every business should be eligible. However, like a lot of government programs, the devil is in the details.
To qualify for the Supply Chain Disruption standard, your business needs to prove all 4 criteria:
- Name and location of the manufacturer/supplier that is unable to make or deliver critical goods or materials to your business.
- Specific Covid-19 Government Order. The disruption must be due to a specific state or local government order and you must provide the duration of the order. Note- it CAN’T be a foreign order.
- Detailed description of how the specific government order disrupted the supplier, your supply chain and how long it was in effect.
- Evidence that your business tried, but couldn’t secure the goods or materials elsewhere. You must be able to show your efforts.
Use extreme caution if you decide to seek assistance from one of the companies touting that nearly every business qualifies. Many of these companies will claim a fee based on the ERTC credit they calculate, but most won’t be around to support or return your fee if your claim is audited. We expect to see more activity in this area than others. The IRS has increased the audit period from 3 to 5 years specifically for this program – if they suspect fraud, the audit period is unlimited!
The Supply Disruption Method seems simple, and if your business qualifies it can be huge windfall. In fact, it is more complex and more difficult to prove that you qualify for this method as opposed to other methods. A lot of additional work is required!
If you think you might qualify for ERTC and are interested in learning more, click the link below to schedule a call and receive a detailed proposal.Book a Call More on ERTC