• For taxable entities:

• Total sales (net of returns and allowances) and all amounts received for services.

• Includes any income from investments:

• Dividends

• Interest

• Rents

• Royalties and annuities, regardless of whether those amounts are derived in the ordinary course of the taxpayer’s trade or business

• Reduced by the taxpayer’s adjusted basis in certain property used in a trade or business or capital assets sold.

• Tax accounting method for income recognition applies.

• For non-taxable entities:

• Gross Receipts means gross receipts of the taxable year and generally includes all receipts.

• Tax accounting method for income recognition applies.

• Includes proceeds from investments and grants.

• Not Reduced by the taxpayer’s adjusted basis in certain property used in a trade or business or capital assets sold.

If eligible, employers can claim the ERC for qualified wages paid in 2020, as well as Q1, Q2 and Q3 of 2021.

Yes, An employer may include wages paid to part-time and full-time employees in the calculation of the ERC.  The only limitation on the calculation of the credits is that an employer may only calculate the credits on the first $10,000 of wages and health plan costs paid to each employee during each credit-generating period.

Yes. The statute of limitations for the 2020 ERC does not close until April 15, 2024.  The statute of limitations for the 2021 ERCs does not close until April 15, 2025.

Yes, an employer may include wages paid to part-time and full-time employees in the calculation of the ERC.  The only limitation on the calculation of the credits is that an employer may only calculate the credits on the first $10,000 of wages and health plan costs paid to each employee during each credit-generating period.

IRS spent around 200 pages on explaining the eligibility of ERC, among those pages are many detailed requirements that is time-consuming to research, including whether wages paid to relatives can be used to apply for credit, etc. The application process requires amendment to previously issued 941 forms, as well as personal and corporate tax forms. This whole process is complicated and tedious. It is better to work with a team of professional accountants to complete the application.

While both PPP and ERC are part of the CARES Act, there are some notable differences: the PPP was structured as a forgivable loan through your local bank via the SBA; the ERC is a payroll tax credit through the IRS – it is not a forgivable loan; it is cash for you to do whatever you choose. The PPP had a specific funding amount and PPP funds ran out; ERC funds don’t run out, you just have to claim your credit prior to the end of the 3 year lookback period. Finally, the PPP isn’t taxable; the ERC is.

IRS spent around 200 pages on explaining the eligibility of ERC, among those pages are many detailed requirements that is time-consuming to research, including whether wages paid to relatives can be used to apply for credit, etc. The application process requires amendment to previously issued 941 forms, as well as personal and corporate tax forms. This whole process is complicated and tedious. It is better to work with a team of professional accountants to complete the application.

Yes! Before the Consolidated Appropriations Act (CAA) was passed in December 2020, businesses could not claim ERC if they had accepted a PPP loan. With the updated CAA, businesses are eligible in 2021 even if they claimed a Paycheck Protection Program loan.

No! It is a cash refund from the IRS for you to spend however you like, including dividends out to owners.

This is not a lending program – tax refunds are issued by the US Treasury. Therefore, all eligible employers will receive the funds they are qualified for so long as they file their claim within the 3 year look-back period. Generally speaking, the ERC program will peak by 2023 and run its course by the third quarter of 2024.

ERC “Version 1” went live in March of 2020 but was mostly ignored due to the focus on PPP. However in December 2020, the Government updated the law with the release of ERC “Version 2” through the Consolidated Appropriations Act. Under Version 2, employers were both retroactively and prospectively allowed to take both ERC and PPP (Round 1 and 2). Version 2 also extended the credit into Q1, Q2 and Q3 of 2021 and increased the field of eligible employers by allowing companies with up to 500 employees to take the credit, up from 100 for 2020. In short, it was a huge expansion of eligibility which opened up a significant opportunity for hundreds of thousands of businesses in the US. In addition, because this ERC rule is so complex and is only valid once for the year 2021 and 2020 alone, most CPAs would not feel it merits their spending hundreds of hours to study and decipher it. 

A business is eligible if they meet one of two tests. Only one test is required and it’s possible to qualify under one test for one period, and another test for a different period.

The first test is a quantitative test that was developed as an objective measure of whether COVID-19 impacted a company’s ability to generate revenues comparable to pre-COVID levels. This test is referred to as the “Substantial Decline in Gross Receipts” test, or SDGR. This test looks to compare quarterly periods in 2020 and 2021 to the same quarterly period in 2019. The relevant percentage threshold is 50% in 2020 and 20% in 2021. For example, if an employer had $49,000 of gross receipts in Q2 2020 compared to $100,000 of gross receipts in Q2 2019, this 51% decline would qualify the employer under the SDGR. Similarly, an employer with $79,000 of gross receipts in Q1 2021 compared to $100,000 gross receipts in Q1 2019, would also meet the SDGR test for Q1 2021. Note that in nearly all cases, if a business qualifies under this test for a quarter, they will qualify automatically for the following quarter, provided at least 6 months of eligibility. The look-forward and look-back tests can be quite complicated and we work with our clients closely to help evaluate eligibility.

Even if a company doesn’t meet the SDGR, they can still qualify if they meet the full or partial suspension of operations test, or FPSO. The full or partial suspension test applies for the periods of time when the operations of a business are shut down due to government order, or are subject to certain restrictions / modifications while they are allowed to keep their doors open (such as reductions in operating hours and capacity limit restrictions). An example of a partial suspension is a restaurant that was forced to move to take-out or delivery only, or was forced to move to a reduced capacity limit with dine-in service due to social distancing requirements. A gym or fitness center that is required to move to appointment-only, reduced capacity, closed day-care facilities, etc. might also qualify under the partial suspension test. A doctor’s office that does more than a nominal amount of elective procedures will almost always have a partial suspension for some period of time. A lesser known partial suspension can occur when a business is affected due to supplier related issues. For example, a business that cannot obtain materials or supplies from vendors that were shut down by COVID-19, can also translate into the first business being treated as partially suspended. Finally, there are complex rules that look at businesses with multiple locations, segments, or divisions and can cause the entire business to be treated as partially suspended, even if only due to one of locations, segments, or divisions.

Eligible employers are small businesses in the US that carry on a trade or business during the calendar year for 2020 and / or 2021 and have fewer than 500 W-2 employees (special note: you can have more than 500 W-2 + 1099 employees and still qualify, you just can’t have more than 500 W-2 employees). This includes tax-exempt organizations that experienced either of the following:

• Full or partial suspension to business operations during any calendar quarter in 2020 and / or 2021. These are attributed to governmental orders that limit commerce, travel or other group meetings due to the COVID-19 pandemic.

• Experienced a significant decline in gross receipts (SDGR) during a calendar quarter for 2020 or 2021. For 2020 quarters, SDGR is defined as a decline of at least 50% compared to the same quarter in 2019. For 2021, this metric has been reduced to a decline of at least 20% for the comparable quarter.

Qualified wages are compensation provided to employees during an eligible period after March 12, 2020, inclusive of health plan expenses.

It depends. It is not taxable or at least not entirely taxable if you have a loss for the year qualified for ERC. However, 100% of your ERC is taxable if your business having taxable income in the year you qualified for ERC because ERC is a reduction of wage expense in the relevant year and thus additional taxable income will be incurred. For example, if you deducted $15,000 in wages for the relevant fiscal year you end up with a profit and you received $5,000 in ERC for that year, you would have $10,000 in deductible wages left and thus incurred additional $5000 taxable income.

Jiahua will provide you full ERC services, including filing and claiming your Employee Retention Credit from the IRS.

Through our process we will collect qualitative and quantitative data to evaluate your eligibility and then perform detailed and complex computations to determine your ERC. Through sophisticated analysis and reporting, we are able to maximize the ERC for clients by carefully selecting how certain wages are treated for PPP versus ERC purposes at the employee level as well as understanding the nuances of a complex tax code.

For all of our clients, we deliver a +10-page report documenting your eligibility as well as the results from our proprietary Jiahua calculator that supports the numbers used to claim your credit. We then prepare any amended payroll tax returns, Form 941-X(s), and file your ERC claim with the IRS. When we do that, we request a refund check for you.

And when that work is done, we commit to helping you in the future in case there are questions about how you arrived at your IRS filing. We do it all for you!

The challenge with CPAs is that the ERC credit is taken on your payroll returns and not through your business income tax returns, which is what most CPA’s handle. So the vast majority of the time, they are not very well versed in the +150 pages of the ERC tax code, which means you may get less than you should! And on the other side, payroll providers like ADP certainly aren’t tax experts – choosing them to do your ERC is like choosing a dentist to fix your foot!

In 2020, we saw a gap in the market that existed between income tax CPAs and payroll providers, where neither were well equipped to handle ERC work. Because most CPAs handling income tax are not well versed in payroll taxes, and frankly are already overextended with income tax preparation, they simply haven’t had the time and resources to develop the sub-specialty in Employee Retention Credits. If you are just hearing of the ERC now from us, this is likely further evidence of that fact.

On the other hand, payroll providers (ADP, Paychex, QuickBooks, Gusto, etc.) will submit an ERC claim for you, but will not provide any assistance in determining eligibility and qualified wages. In most cases, they are requiring employers to sign waivers of liability so that the payroll provider cannot be held liable for errors, omissions, or overstatement of ERC claims. Choosing this option may create an immense amount of risk of penalties and other punitive actions from the IRS.

In March of 2021, the IRS finally came out with more than 100 pages of detailed guidance on the application of both ERC Version 1 in 2020 and ERC Version 2. Since it has been released our team of experts have read this over and over and over again, along with the bills that contain the original law. The IRS guidance is extremely detailed, very thorough, and immensely complex.

In addition to the IRS guidance that came out in March, yet another stimulus bill, the American Rescue Plan Act (ARPA) was released the same month that extended the ERC further into 2021. Internally, we refer to this as ERC Version 3. ERC Version 3 largely employs the same rules as ERC Version 2, however it also includes a variation of the ERC called the Recovery Startup Credit (RSC). The RSC can be claimed by any new business started after February 15, 2020, regardless of whether COVID-19 affected the operation or financial results of the “startup business.” The RSC is capped at $50K per quarter (using the same 70% x $10K to reach it), and is only available for certain quarters of 2021.

Is your head spinning yet? Don’t worry, that’s why we’re here – to get you the maximum amount you are due from the Employee Retention Credit program. Just contact us and get started today!

Yes, absolutely. We do a lot of “second look” work where Clients have us review their original ERC submission and if we find more credit than originally claimed, we can re-amend your Form(s) 941-X to get you any additional amounts. Even if you’ve gotten your ERC check already and cashed it, there is still an opportunity to re-amend and re-file your claim to get the max credit you deserve. We have obtained the ERC check for the 3rd quarter of 2021 for many business who were told by their CPA that they did not qualify, and we have obtained the ERC for the 4th quarter of some business who did not expect to be qualified. 

We have received most of the refund checks within 3 months lately, some of them in two months. There are a minority of cases that take longer. IRS did not provide any estimates related to the timing of Employee Retention Credit receipt. We encourage those business still did not apply to apply by the end of year 2022 at latest. IRS has indicated that there are over 1.8 million paper payroll tax returns in the queue with the IRS. We would guess that in the year 2023 you are likely to wait eight to twelve months to receive the IRS checks from the filing date of your claim.

Do not worry. Jiahua always ensures our filing meet all the legal prerequisites and is fully compliant with the current law and regulations. We are able to obtain more credits for our clients (such as credits for the third and fourth quarters of 2021) based on our in-depth decipher and grasp of ERC terms, explicit or implied, and the most reasonable application of proven IRS regulations. Moreover, the documents we submit to the IRS are clear, concise, and well-supported. For quarters with gray areas, we will cite relevant regulations and laws, and attach various official proofs. Therefore, we can rest assured that the IRS generally will not audit our reports to begin with, and even if they do, there will be no issues and certainly no recovery of funds whatsoever. In our contract, Jiahua promises that if the client provides truthful information and once the ERC check is received, if there is any subsequent liability or penalty stemmed from the IRS auditing, Jiahua will not only refund the relevant service fee6 but also assume the responsibility for all related fines and interest. Jiahua has great confidence in our compliance and is thus far the only accounting firm that has included this commitment in our contract and on our official website.

The IRS rules emphasize that closed companies can apply for an ERC as long as they employed employees during the outbreak.

Successful applicants to the ERC are from a variety of industries. The restaurant and hospitality industry are basically guaranteed to qualify, other businesses including logistics and distribution like FedEx, cafes and bars, hotels and hospitals, preschools and daycare centers, gyms, and even some non-profit organizations like hospitals and clinics, churches, and non-profit organizations like the YMCA sports venues can all apply if they qualify for the ERC. In addition, even city and county governments whose staff are under 500 may be eligible for some quarters.

Not really. You may use them with virtually no restrictions. For many other incentives, like the Restaurant Revitalization Grant, or the PPP Loan, there were some restrictions on how that money could be used. But ERC is not quite the same and is not restricted to be used on workers' wages or for  operation of the company.

If a company is founded after February 15, 2020, such a company can also apply, which can be done by comparing the revenue of the first quarter of 2021 and 2020, or the other application requirements previously mentioned.

Unfortunately, no. W2 and 941 are both required to be qualified for ERC.

No. 1099 can NOT be used to apply for ERC. This is the red line we cannot cross. We file only based on true documents and will not handle the amendment for any “back taxes”. Also, it is not worth the potential auditing risk for the employers.

Just answer the few questions on the form on the homepage of this website. Then we’ll give you a quick call to confirm your info and provide you an estimate of your expected IRS credit / refund within 5 minutes!

It’s really that simple to get started.

After our call, we’ll send you an engagement letter to sign to get started. After it’s returned, we’ll gather the data needed and that’s when we really get to work – it generally takes a week to complete our work for your IRS submission. We then file a claim on your behalf with the IRS and send you back a complete Client Package with all of the workpapers and information for your recordkeeping.

After that, you wait for your check to come in the mail from the US Treasury!