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Not all Employee Retention Credit (ERC) processing companies are equal. Here are three ERC processing red flags that you should never ignore.
1. Your ERC estimate is too good to be true.
While ERC can result in meaningful cash back for many companies, this simple calculation below can help determine if your ERC processor is properly computing your credit.
Gross Wages paid 3/13/20 to 9/30/21
– Wages used for PPP Forgiveness (if applicable)
– Wages paid to Owners and their Family Members
= Net Eligible Amount
Net Eligible Amount x 60% Estimated Blended Wage Limit
= Maximum ERC Estimate
If you were provided an ERC estimate higher than your Maximum ERC Estimate, your ERC processor may not be abiding by ERC wage rules. Bypassing ERC’s wage regulations artificially inflates your ERC refund amount, which can cause you to file for more ERC than you are eligible to receive.
2. You qualify for all seven quarters (Q1 2020 through Q3 2021) without speaking to a legal professional who specializes in COVID-19 shutdown regulations.
The Maximum ERC Estimate shown above would only be valid in cases where your business was determined to be eligible for ERC for all of 2020 and all possible quarters in 2021. In any other scenario, the Maximum ERC Estimate would be lower.
In 95%+ of cases, without a detailed conversation with a professional focused on COVID-19 shutdown regulations, an ERC processor cannot determine if your business fully qualifies for ERC. NEWITY’s team analyzes your company’s pre-and-post shutdown metrics and memorializes the shutdown impacts to ensure your business is eligible for ERC in each quarter that you file.
Paid preparers, like NEWITY personnel, are registered with the IRS and support you with calculations and legal documentation if your ERC calculation is ever reviewed or audited.
3. The processor does not sign your Form 941-X as a paid preparer.
Beware any processors that do not sign your Form 941-X as a paid preparer. Form 941-X is a tax document that is filed with the IRS to claim ERC. If your ERC processor does not sign your Form 941-X, the ERC processor is not registered with the IRS and is acting as a shadow preparer. As a shadow preparer, the ERC processor can avoid any future audits or reviews of your ERC calculation. NEWITY’s personnel are registered with the IRS and support you with calculations and legal documentation if your ERC calculation is ever reviewed or audited.
If any of these sound like your ERC processor, or if you are unsure if you qualify for ERC, NEWITY is here to help. NEWITY’s ERC team can help you determine if you qualify for ERC at no upfront cost to you. Get started today by completing NEWITY’s ERC application.