Employee Retention Tax Credit & PPP Loan Forgiveness Questionnaire

In December 2020, Congress passed a law that made it possible for your business to be eligible for the Employee Retention Credit, even if you had already received a PPP Loan.

The Employee Retention Tax Credit is a potential credit of up to $5,000 per employee (8 employees = Up to $40,000 credit) if certain conditions are met.

The credit only applies to employees that received a W-2 at the end of the year. For sole proprietors, this will only apply to your employees. For corporations, this will apply to all employees, including the owner (even if the owner is the only employee).

For employers who qualify, including borrowers who took a loan under the initial PPP, the credit can be claimed against 50 percent of qualified wages paid, up to $10,000 per employee annually for wages paid between March 13 and Dec. 31, 2020.

Qualification is determined by one of two factors for eligible employers — and one of these factors must apply in the calendar quarter the employer wishes to utilize the credit:

1. A trade or business that was fully or partially suspended or had to reduce business hours due to a government order. The credit applies only for the portion of the quarter the business is suspended, not the entire quarter.

2. If gross receipts in a calendar quarter in 2020 are below 50% of gross receipts when compared to the same calendar quarter in 2019, an employer would qualify. They are no longer eligible if in the calendar quarter immediately following their quarter gross receipts exceed 80% compared to the same calendar quarter in 2019.

You must first determine if you qualify. Then you must determine what time period you can apply this to. Once you have determined the time period, you can count up to $10,000 of each employees gross wages towards the 50% credit.

If there is any period that overlaps with the covered period of your PPP loan, you cannot count wages for both the Employee Retention Credit and PPP forgiveness.

We believe that most physician and dental practices will qualify for this credit, but need to be careful about overlap with the PPP loan. Especially if you have already received forgiveness on your first PPP loan, you need to be careful about how your approach the Employee Retention Credit calculations.

You can find more about the Employee Retention Credit on the IRS website here.

By selecting "No" on the previous question, you understand that you may be forfeiting a refundable credit of up to $5,000 per employee.

The Employee Retention Credit funds will not run out. You have 5 years to obtain this credit.

If you change your mind in a couple years and decide to get the credit, you will need to amend your 2020 tax return.

Edward Challberg CPA is ready to help you obtain the Employee Retention Credit for your business.

By hiring Edward Challberg CPA to complete this credit for you, we will provide the following items:

1. An accurate calculation on the amount of your Employee Retention Credit
2. We will complete the payroll tax return Form 941-X so that you can obtain the credit as quickly as possible
3. We will ensure that there is no improper overlap with your PPP loan and that your PPP forgiveness is maximized
4. We will complete a comprehensive and accurate forgiveness application (3508, 3508EZ, or 3508S) that you can then use to apply for PPP forgiveness at your bank. 

Providing these services is outside of the scope of our regular monthly accounting services. Significant resources are needed to be able to provide this to you in an accurate and timely manner.

Fees:

Since you plan to obtain the Employee Retention Credit, we do not recommend filing your 2020 business tax return until the credit is calculated.

If Edward Challberg CPA is not completing the Employee Retention Credit calculation, we will wait for you to provide us with the amount of the credit before completing your 2020 business tax return.

Please notify us when you receive your Employee Retention Credit so we can complete your tax return. 

If you would like us to complete your Employee Retention Credit, but you don't have time to complete the form now, you can complete the qustionnaire when you are available, but since we are unable to save your progrss. You will need to restart the questionnaire from the beginning at that time.

At any point in 2020, was your business suspended due to governmental orders?

Specifically, the CARES Act states "...the operation of the trade or business is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to the coronavirus disease 2019 (COVID-19)."

The IRS has clarified that governmental orders include:

An order from the city’s mayor stating that all non-essential businesses must close for a specified period;

A State’s emergency proclamation that residents must shelter in place for a specified period, other than residents who are employed by an essential business and who may travel to and work at the workplace location;

An order from a local official imposing a curfew on residents that impacts the operating hours of a trade or business for a specified period;

An order from a local health department mandating a workplace closure for cleaning and disinfecting

The Employee Retention Credit is not allowed for wages paid to family members, as detailed in the below list:

• a child or a descendant of a child
• a brother, sister, stepbrother, or stepsister
• a father or mother, or an ancestor of either
• a stepfather or stepmother
• a niece or nephew
• an aunt or uncle
• a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law