In this episode of Practical Tax, tax attorneys Steve Moskowitz and Cliff Capdeville discuss the many ways to file for, and claim the Employee Retention Tax Credit for your business. In many cases, business owners feel like they won't qualify for a litany of reasons, but they are often misinformed. Steve and Cliff are here to shed some light on the details of the Credit, and how Moskowitz LLP can help you file and claim. Listen to the podcast and learn more!

Episode Transcript

Intro:

You're listening to the Practical Tax podcast with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz LLP, a tax law firm.

Steve Moskowitz:

Hello, and welcome back to the Practical Tax Podcast. I'm your host Steve Moskowitz, Senior Partner at Moskowitz LLP. Today, I'm joined by the Managing Attorney of Moskowitz LLP, Cliff Capdevielle. Our topic today is why so many business owners have completely failed to take advantage of the billions of dollars the government's made available to business owners with the Employee Retention Credit, ERC. And how you can get your share of this massive of government giveaway before it's too late. But before we jump in, a little bit about Cliff. Like I said, he's the Managing Attorney at Moskowitz LLP, a leading law firm, laser focused on tax planning and tax controversies. A tax attorney with more than 25 years experience helping business owners and investors save money on their taxes. He hails from the California Bay Area, Go Bears! And now leads our entire remote team around the world. Cliff, welcome to the show. Let's first define the Employee Retention Credit or ERC.

Cliff Capdevielle:

Steve, the Employee Retention Tax Credit is a refundable credit, for employers who are keeping their staff during the pandemic. This is a credit that's available to all employers including employers who took advantage of the Paycheck Protection Program, the PPP. And, today I hope we can straighten out some common misconceptions and help all of those businesses that have yet to take advantage of this credit, to do so. Thanks for having me, Steve.

Steve Moskowitz:

It's a pleasure. Cliff, can you tell us the difference between a refundable credit and a non-refundable credit?

Cliff Capdevielle:

Sure, very easy. Refundable credit is money in your pocket. So with the Employee Retention Tax Credit, businesses are receiving a refund check in the mail just like you do with your income tax refund. You can cash it, you can spend it however you want. If you wanna increase staff, if you wanna buy equipment, if you want to go on a vacation. Like I hear, you're on your way to a vacation next week.

Steve Moskowitz:

A working vacation Cliff 'cause I'm always there for our clients.

Cliff Capdevielle:

Absolutely

Steve Moskowitz:

So Cliff, tell me, this ERC, is this something that we'd ever have to pay back?

Cliff Capdevielle:

You don't have to pay it back. It's not a loan. It is a refund, just like your tax refund. You can keep it and spend it, and never worry about paying it back. And you don't have to use that money in any particular way. You don't have to use it on payrolls or any other particular purpose.

Steve Moskowitz:

Do I have to do something to ask forgiveness like I did with PPP?

Cliff Capdevielle:

You don't, this is a credit just for keeping your staff on payroll during this pandemic. And it's in addition to the PPP. So a lot of people call us every day, they're worried they're not gonna qualify for the Employee Retention Tax Credit because they already took PPP money. That's not true. You can get both.

Steve Moskowitz:

Is that a change in law, Cliff? Does it used to be that you couldn't get both?

Cliff Capdevielle:

It is exactly, well, now 2020, you could not in some months get both PPP loan and the Employee Retention Tax Credit. Starting in the fourth quarter of 2020, the law changed and now eligible employers are allowed to get both the PPP and the ERTC where retention tax credit in the same quarter. And, that's a great, been a great help to a lot of clients.

Steve Moskowitz:

So Cliff, this credit, is it a credit or does the government actually write me a check?

Cliff Capdevielle:

You actually get a check. You'll actually put money in your pocket. It's a refund check. Just like your income tax refund it'll come in the mail and you can spend it however you like.

Steve Moskowitz:

And how much is it possible to get?

Cliff Capdevielle:

It's actually unlimited. The only barrier is the amount of your payroll. So even large employers are eligible. We've had clients get over a million bucks refunds and it's been a great help to those clients.

Steve Moskowitz:

And how much would I get? What's the maximum I can get per employee?

Cliff Capdevielle:

It differs from year to year. So for 2020, the maximum was $5,000 per each employee for the year. In 2021 that was increased all the way up to $21,000 per employee. So it's been a great help.

Steve Moskowitz:

So that means it's potential that I get up to $26,000 per qualified employee.

Cliff Capdevielle:

That's correct. That's per employee, not per business, not per employer, that is for each and every employee potential refund of $26,000.

Steve Moskowitz:

So does that mean if the employer had 10 qualified employees they get up to $260,000 over a quarter of a million bucks?

Cliff Capdevielle:

That's absolutely correct. And we've helped many many clients at this point get that much and more.

Steve Moskowitz:

And 20 qualified employees over a half a million bucks and so on?

Cliff Capdevielle:

Absolutely.

Steve Moskowitz:

That is fantastic. So tell me Cliff, why shouldn't some employer who say, uses a payroll company go to the payroll company and say, hey, payroll company, you have my payroll record just go ahead and do this for me. Why not do that?

Cliff Capdevielle:

They're not doing it first of all, second, there really isn't any off the shelf software or any easy way way to do these calculations. You really need a tax attorney to carefully review the law in your particular case with regard to the governmental restrictions and your partial suspension issues in addition to accounting. So there's the accounting piece to to see if you qualify based on the numbers, but there's also the legal part. And that's where we have particular expertise because we are familiar with the laws and we're attorneys, we know how to interpret these government regulations.

Steve Moskowitz:

Cliff, let's go back to the payroll companies. Has it been your experience that the payroll companies that offer this will just do the very last part, the amended return but they leave 99% of the work up to the company if you use the payroll company? What's that all about?

Cliff Capdevielle:

Steve if you're lucky, if you're very lucky, they will prepare the form for you. Most payroll companies aren't doing that. And your local CPA is probably not gonna do that for you, and they absolutely will not do the calculation and there's no way that they're going to do the legal research necessary to maximize this credit for you.

Steve Moskowitz:

So Cliff, why aren't the CPAs interested in doing this for their clients?

Cliff Capdevielle:

Well Steve, there's no off the shelf software. It's not simple. The law keeps changing, and this is what really frustrates accountants. As you know, you worked with accountants, your whole career you know that they very much-

Steve Moskowitz:

Not to mention I was a CPA before I was a tax attorney.

Cliff Capdevielle:

Absolutely, and as you know, the accountants are very careful and they like to understand the rules before they do anything. The problem in our case is the government's changing the rules as we go. So this has made CPAs very uncomfortable, and a lot of them are reluctant to do it even for with their own clients. So we have many many people call us who have CPAs, who have good CPAs, and they're hearing from their CPAs that CPAs don't wanna touch this. It's too complicated. There's too much legal research involved and they just don't wanna do it.

Steve Moskowitz:

So Cliff, how do we qualify for ERC?

Cliff Capdevielle:

There are a couple ways to qualify. One is on the numbers. So if your receipts, your gross receipts per quarter are down significantly when you compare that to 2019, which is the base year for the calculations.

Steve Moskowitz:

How much is significantly down? What's the number?

Cliff Capdevielle:

Yeah, significantly down depends, and if we're talking about tax year 2020, all four quarters, that you're gonna need to show per quarter a decline in gross receipts of 50% versus 2019 in order to meet the safe harbor qualification for the four quarters in, sorry. For the first three quarters of 2021 you need to show a decline grocery seats of at least 20% versus the same quarter in 2019.

Steve Moskowitz:

Well that's terrific because 2021 seems like it's a lot easier to get because first of all, we only have to be down 20% as opposed to 50% but also 2021 we can get up to 21,000 as opposed to 5,000 in 2020. So if we go ahead and we qualify on the numbers, no brainer, but suppose we don't, is there any other way to get ERC?

Cliff Capdevielle:

Absolutely, so if you were partially suspended and this was where it gets tricky, then you also qualify. So partial suspension means, that there's been a more than nominal change in your business, in other words, you have had restrictions because of government orders or regulations that limit the amount of business that you can do. For example, a restaurant. If a restaurant is not allowed indoor service or a restaurant has a restriction on the number of tables, those kind of restrictions constitute a partial suspension and would therefore qualify that employer for the credit.

Steve Moskowitz:

So you mean for example,