“Why haven’t I heard about ERC like I have PPP?”
This is a common question we get when it comes to the Employee Retention Credit (ERC).
If we think back to 2020, it feels like PPP 1.0 and PPP 2.0 dominated every accountant-led conversation.
I know we certainly wrote an endless amount of content and emails about PPP at The Fitness CPA.
So, why isn’t everyone talking about ERC in the same way? Especially since it came out of the same CARES Act as PPP!
Well, there are many reasons for it. From changing regulations, to CPA fatigue, things are a bit different this time around with ERC.
In this post, we’re going to take a deeper look into these reasons to give you a better understanding of ERC, and what you can do about it if your accountant hasn’t mentioned it to you yet. Let’s dive in.
The Original Employee Retention Credit
We mentioned that the Employee Retention Credit was born out of the same CARES Act as PPP, passed in 2020 for COVID-19 relief.
However, ERC looked differently back then.
For starters, ERC was not originally accessible for businesses who took part in PPP funding.
Back in March 2020 when the Employee Retention Credit first came about, you had to choose between PPP funding OR ERC. And in virtually every instance, it made more sense for a business to utilize PPP.
However, fast forward to 2021, and the rules have changed.
In December 2020, Congress realized that very few businesses were using the funds allocated for the Employee Retention Credit (ERC).
Therefore, they decided to loosen up the restrictions placed on the credit.
Under the new rules, you can now claim the Employee Retention Credit (ERC) in combination with the PPP funds you’ve likely already received.
This means that even if your business took part in PPP, you can also take part in ERC.
You can find out if your fitness business qualifies in 60 seconds here.
Along with relaxing the rules on ERC and PPP, the IRS have also moved the goal posts – several times – in regards to which months (and years) are eligible for the tax credit.
The first change came in December 2020, when they made it possible to retroactively claim the Employee Retention Credit (ERC) going back all the way to the beginning of 2020.
That’s up to $5,000 per employee for 2020 that you may not have been able to claim, originally.
Additionally, they made the Employee Retention Credit (ERC) eligible for Q1 and Q2 of this year (2021), and later amended it again to include Q3 and Q4 2021 in the calculations as well.
And that’s where it stands now.
You may be eligible to claim the Employee Retention Credit for all of 2020 and 2021, until the end of the year.
With all of the regulation changes, it’s easy to see why the Employee Retention Credit flew under the radar initially – no one said to bother – and only recently moved into the limelight as a lucrative opportunity for businesses.
It didn’t become the powerhouse tax credit that it is today, overnight.
Another reason why the ERC isn’t as popular as PPP is because the calculations for the Employee Retention Credit are complex even for the most qualified accountants.
There is a lot of work that goes into the calculations, and quite frankly, a lot of accountants are staying away from it because they aren’t sure how to do it.
Or more importantly, they aren’t sure how to do it accurately, and could potentially risk having their clients audited.
For accountants who haven’t invested the hours and hours it takes to learn the nuances of the calculations – and better yet, how to maximize the calculations for clients – the risk just isn’t worth the reward.
Another reason you probably haven’t heard of the Employee Retention Credit (ERC) comes down to an overwhelming sense of fatigue in the public accounting field.
Has anyone heard of sleep around here?
After thousands of pages in law changes throughout 2020, and what we like to call a “never-ending tax season”, many accountants are simply too exhausted to dive into another work-intensive project at the moment.
We won’t dive into the nitty gritty details of the work involved on this post, but just know that the Employment Retention Credit involves going back and amending every single tax return for 2020 and 2021, and finagling the numbers in the best way to retroactively claim the tax credit in combination with PPP for each quarter of 2020 and 2021.
If it sounds like a lot of work, that’s because it is.
But trust us, the results are worth it.
On average, our clients at The Fitness CPA have received $57,000 in cash through the Employee Retention Credit, and 2021 isn’t over yet!
Here are just a few of the refund amounts we’ve secured for The Fitness CPA clients:
“I thought, “No Way!?” Is this a prank? We’re getting back $116,323! The Fitness CPA was the only business that let us know that ERC was even available. It will help us tremendously, especially after the challenges we have faced over the past 14 months.” Peter Blumert, Prevail Conditioning
“We’re getting $88,233 back. Wow!!! I love The Fitness CPA. There’s no other explanation than that. They go above and beyond, and if it wasn’t for them, I honestly don’t know where I would be for the books, taxes, and everything!” Evan Myers, Anytime Fitness
However, there are many accountants who simply don’t have the bandwidth or resources to learn and master ERC, and we can’t say we blame them.
Lack of Industry Knowledge
Last but not least, your accountant may not have mentioned ERC to you due to a lack of industry-specific knowledge.
Most accountants are generalists. Meaning, your business may be only one or two fitness businesses, in a sea of clients, that your accountant looks after. This means that your accountant or CPA:
- · May not realize just how easy it is for gyms and fitness businesses to qualify for the Employee Retention Credit (ERC), whereas the rest of their client base largely does not qualify and/or has already recovered from the pandemic.
- · Is not aware of the many alternative ways to qualify for the credit (example: the permitted “alternative lookback calculation”) and how to maximize the credit for gyms and fitness businesses.
- · Many gym owners are multi-location businesses requiring detailed calculations for the Employee Retention Credit.
- · Even if an accountant knows about the credit – they will not fully understand how capacity restrictions and social distancing requirements qualify almost every fitness business while understanding exactly what questions to ask in order to get the most credit possible.
We wrote another blog post on Why You Qualify for the ERC as a Gym or Fitness Business (Even if you don’t think you do!) and strongly recommend giving it a read if you’re unsure.
Otherwise, we’ve made it pretty easy to check for yourself with our 60-second quiz:
If you are a fitness business who uses a generalist CPA, you can sign up for our fitness-specific content to make sure you never miss out again on industry-related opportunities for your business.
So, how do I get the Employee Retention Credit?
But if you’re chomping at the bit to get thousands of dollars back for your fitness business, we’ve made it really easy to get started.
First, you can find out in 60 seconds if you qualify using our quick quiz:
If it turns out you qualify (we’re pretty sure you do!), The Fitness CPA will provide you with a free, accurate calculation with absolutely zero obligation to you.
That’s right. We’ll calculate your ERC for free!
Simply head over to our form, fill out a few questions, and we’ll send you the next steps via email.
After the calculations are complete, you can choose whether you go ahead with the work, or use your accountant of choice. It’s that easy!
Not ready yet?
You can also learn more about the Employee Retention Credit on our main website, here.
If you have a question or concern, you can reach out to me personally at any time by filling in our Get in Touch page here.
In the meantime, you can check out our Ultimate Guide To The Employee Retention Credit to help with any questions you may have:
- What is a Deemed Election and How Does it Affect Your Employee Retention Credit Refund? - August 15, 2023
- Paying Workers: Employees vs. Contractors for Gyms & Fitness Businesses? - March 28, 2023
- 3 Employee Retention Credit Tips You’d Pay a CPA For - March 6, 2023