Dispatch # 72 ERTC - Don’t Forget This Potentially Major Tax Break
In Dispatch #64 I wrote that the Employee Retention Tax Credit (ERTC) was worth another look. Well, this tax break has gotten even better since then, courtesy of the American Rescue Plan Act signed back in March of this year.
The benefits can be substantial (one contractor I work with just calculated $350K of credits through Q1 2021) so if you haven’t explored it, here’s what to do:
Hire an expert to determine your firm’s eligibility. If “yes,” ask them to calculate the benefit, strategically allocating wages among your PPP loan forgiveness application and the ERTC. Don’t miss your PPP loan forgiveness deadline, but if possible, “pause” on applying for forgiveness until you’ve assessed the ERTC.
One advantage of the longest tax season in recent history is that most likely your 2020 corporate tax returns are still open. But if not, and there’s significant benefit, consider amending your company’s 2020 returns to incorporate the ERTC benefit.
Regarding hiring an expert, as recommended above, I stand by my reasoning in Dispatch #64, but tilt even more to recommending a third party tax incentives company. The calculations can get complicated, the test criteria have evolved, and above all, you want a tight audit book and shared audit defense should your claims be challenged by the IRS in the future.
To be sure, taking the ERTC will complicate your accounting, but if the dollars are there, it’s well worth it.
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.