alliantgroup has provided this very valuable article about the ERC.
Top 5 Things Leading Age Members Need to Know about the Employee Retention Credit
A lot of not-for-profit aging service providers have started to take advantage of the Employee Retention Credit (ERC). The ERC is the single most powerful tax incentive available to providers serving long term nursing facilities, skilled nursing facilities, home care, continuing care retirement communities, assisted living facilities, nursing homes and memory care providers, and it can generate six figure cash refunds. Many LeadingAge members have overlooked this credit due to some common misconceptions and we want to make sure all members are properly educated so they can claim what they are eligible for.
What is the Employee Retention Credit?
Many aging service providers have mistaken the ERC for the Work Opportunity Tax Credit (WOTC), which many members are already claiming. The ERC is actually a more powerful credit that can be worth significantly more than WOTC, but where did it come from and what is it?
The ERC was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) act in 2020. At the time of introduction, you could not claim ERC alongside the Paycheck Protection Program (PPP). Since most businesses took PPP loans, ERC was mostly ignored. It wasn’t until the Consolidated Appropriations Act of 2021 (CAA), that Congress allowed businesses to claim both PPP and ERC.
With that restriction removed, businesses in almost every industry started to claim the benefit. Former IRS Commissioner, Eric Hylton, even said that while he was at the service, that they expected 70-80% of businesses to claim the credit.
Even though it now applies to aging service providers, many members are still not taking advantage of the ERC due to misinformation.
What Leading Age Members need to Know
Here are the top 5 things members need to know to take advantage of the credit.
- There are actually two ways to qualify
Even members that are educated on the credit may not realize that there are two distinct ways to qualify. The first is if your business had a decline in revenue compared to where you were in 2019. Many providers have mistakenly assumed that if your revenues are up, that you cannot qualify. In fact, Congress wants businesses that are doing well to claim the credit as well so they can continue to hire workers, which is why there is a second pathway to qualification, business impact. If your service had to made adjustments to operations between 2020 and 2021, such as dealing with restrictions to visitors or difficulties working with vendors, then your business can qualify, even if your business was doing well overall.
- ERC is not WOTC
One of the common mistakes LeadingAge Members have made when it comes to claiming ERC is assuming they are already claiming the credit. It turns out many of these members are conflating ERC with WOTC. WOTC is a credit to businesses that hire workers from a designated group such as ex-felons, veterans and workers on Supplemental Security Income (SSI). If your business is claiming WOTC you can actually claim ERC in addition to maximize your potential refund.
- You can now claim both ERC and PPP
The PPP loan program was the most popular stimulus program of the pandemic. Many businesses have assumed that if you claimed PPP, you cannot also claim ERC. That restriction has been removed by the CAA, so even if you had your PPP loan fully refunded, you can claim ERC as well. That means you can claim PPP, ERC and WOTC. It is important to note that if you are claiming all three you need to do it the right way as there is interplay between the programs.
- ERC comes as a Refund Check
Unlike PPP, the ERC is not a loan and does not come with restrictions on how you can use the funds. The ERC is a credit against your payroll tax for 2020 and 2021 but since you likely already paid your payroll tax for those years, the money comes back to you in the form of a refund check. Once you get the check from the IRS you can do with the money what you want.
- There is no requirement to pay upfront fees to an ERC provider
There have been ERC providers that have reached out to LeadingAge members offering to help them claim the credit but they are asking for an upfront fee to be paid. These providers are even saying that this is required by the IRS. That is simply not true. You should not be paying upfront fees to any ERC provider and if someone is asking you to do so, beware.
An Example from a Member
We recently helped an aging service provider claim $664,000 in refunds through the ERC. This client is a continuing care retirement community and had made it through the pandemic relatively unscathed. They had heard of ERC but assumed the credit wasn’t meant for them because they had done well. When their CPA introduced us to them, they said they had no impacts from COVID.
We then asked if they had to restrict visitors and vendors, which would make them eligible. Their response, “Of course, everyone did.”
Overlooking the adjustments they had to contend with is how they almost missed out on six figures in refunds and we think every LeadingAge Member should seriously take a look at this benefit. If you are not claiming ERC, reach out to alliantgroup and let an incentive expert determine how much you may be eligible to claim.
Please contact Missy Waites at missy.waites@alliatgroup.com or Ceilidh Evans at Ceilidh.evans@alliantgroup.com for more information.
