Dispatch #64 - The Employee Retention Credit: Worth Another Look
Whether your construction firm has applied for Employee Retention Credits or not, they’re worth a second look. Recently passed legislation greatly increases this program’s potential economic benefit to your company:
Firms that received a PPP loan round 1 are now eligible for Employee Retention Credits (ERC) and can apply retroactively. You can’t use the same wages in both programs, but take a look: are there any wages left over for use in the ERC program?
The program has been expanded to include two more quarters of wages: Q1 and Q2 2021 i.e. through June 30th of this year.
The gross receipts test for eligibility is easier to satisfy.
Wages eligible for the ERC have been expanded.
The maximum ERC per employee is higher.
Advanced payments against the wages, before they are paid out, is allowed.
Tactically, here are two ways to maximize your ERC benefits:
During your PPP loan round 2 forgiveness application, you want to consider the ERC and other credits (R&D tax credits, Work Opportunity Tax Credit, etc.) you are claiming as part of an overall analysis to ensure you capture the largest overall benefit.
Consider asking your CPA or a third-party tax specialty firm to calculate, apply for, and document your firm’s Employee Retention Credits.
Like all the COVID-19 relief programs, this one has its nuances and complexities, so an expert will help you do it right and prepare an audit book (in three years we won’t remember what shelter in place dates limited our operations, which jobs were delayed, etc.);
Partnering with an expert will allow your Controller to focus on their day-to-day financial work that supports selling, delivering, and collecting payment for profitable work;
As long as you come out well ahead, net of professional fees, it’s (almost) free money.
Further reading: see Dispatch #28 for my original ERC post (nine long months ago!), and here’s a good overview of the new, expanded program.
Need help with this or other financial matters faced by construction contractors? Let’s talk!
David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.