OUR Corporate Counsel

OUR EXPERTS

Michelle Kim StoneCorporate CounselProService Hawaii

Joan FujitaCPA, MBT, Tax Managing DirectorAccuity

Moderated by Steve SetoVice President of MarketingProService Hawaii

How do I apply for ERC?

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What is ERC?

Does my business qualify for ERC?

How much could my business qualify for?

What documentation do I need to apply?

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AGENDA

What is the Employee Retention Credit (ERC)?

● Additional, no-obligation funds

● Up to $5,000 per employee for 2020

● Many employers qualify retroactively with new rules. PPP + ERC is possible!

● Payroll Tax Credit

What is ERC?



Drop of 50% or more, compared to the

same quarter in 2019.

Significant Declinein Gross Receipts01

Full or partial suspension,due to government order (federal, state or local).

Suspension by Government Order02

Two ways to qualify:





Does my business pass the Gross Receipts Test?

50% or more decline in gross receipts during at least one quarter in 2020, compared to the same quarter of 2019.

Q1 Q2 Q3 Q4

10% ↑ 53% ↓ 38% ↓ 26% ↓


Q1 Q2 Q3 Q4

10% ↑ 53% ↓ 38% ↓ 17% ↑



If you qualify for at least one quarter of 2020, you will continue to qualify for succeeding quarters until the gross receipts decline is 20% or less.




If you qualify for at least one quarter of 2020, you will continue to qualify for succeeding quarters until the gross receipts decline is 20% or less.

Most straightforward way to qualify and likely for a longer time period.




Government order mandates a full suspension of your business operations.

or,

Government order mandates a partial suspension of your business operations.

Only wages paid while your business was affected by the the shutdown order in place will be eligible for credit.

Does my business qualify for a government suspension?


Full or partial suspension,due to government order (federal, state or local).

Suspension by Government Order02

What qualifies as a partial business suspension?

The primary aspect of your business has been suspended, but other aspect(s) still operating.

The primary aspect of your business is operating, but restrictions to normal business operations in place.

Your business cannot operate as normal, due to the suspension of a critical supplier.

Tour company is able to continue hosting guided tours, but with limited group numbers due to social distancing mandate.

Spa is able to resume personal care services but because of indoor face-mask mandate, cannot offer facial services.

Auto-parts manufacturer must suspend operations because their supplier of raw materials is required to suspend operations, and the manufacturer is unable to procure materials from an alternative supplier.

Restaurant is ordered to suspend dine-in service but may continue to offer takeout or delivery.

Retail Store is ordered to close its storefront location but may continue to fulfill online orders.

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Causes of business hardship that do NOT qualify for ERC:

Lack of demand due to stay at home order.

Voluntarily suspending operationsdue to COVID-19.

Ability to replicate businessoperations via telework.


What documentation do I need to apply

for ERC?

Documentation to qualify for >50% gross receipt decline

Quarterly gross receipts

Profit and Loss Reports

Tax Returns

Updated trial balances and populated schedules

What documentation do I need?

Tax Form 1120, 1065, 1040, or 990

EXAMPLES OF

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Documentation to qualify for a full or partial

government suspension

Start and end dates of your business suspension

ProService will identify and include a copy of the relevant government order

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Additional documentation to qualifyfor a partial suspension:

Reports showing 10% decline in quarterly gross receiptsof dine-in service

Schedules showing 10% decline in the hours of service performed by employeesin dine-in service

The primary aspect of your business has been suspended, but minor aspect(s) still operating.

Restaurant is ordered to suspend dine-in service but may continue to offer takeout or delivery.

Examples:

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The primary aspect of your business is operating, but restrictions to normal business operations in place.

Spa is able to resume personal care services but because of indoor face-mask mandate, cannot offer facial services.

Examples:

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Schedules showing 10% reduction in appointments for facial services

Schedules showing 10% decline in the hours of service performed by employees for facial services

Reports showing 10% reduction in purchasing of supplies for facial services

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Your business cannot operate as normal, due to the suspension of a critical supplier.

Auto-parts manufacturer operations are constrained because supplier of raw materials is required to suspend operations, and the manufacturer is unable to procure materials from an alternative supplier.

Examples:

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Declaration by business owner of inability to purchase materials from an alternative supplier

Copy of order requiring supplier to suspend operations

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How will PSHpartner withyou?

Ensure that you qualify.

Determine which quarters you qualify.

Work with you on the documentation needed to confirm your eligibility.

Confirm your eligibility.

Calculate your credit.

Accurate and documented calculation of your ERC amount.

Calculate your credit, net of PPP, FFCRA, other government funding.

Ensure you are not “double dipping.”

File your ERC amount with the IRS.

Ensure all your documentation complies with IRS guidance.

Ensure your ERC tax filing is correct.

Process credit to your payroll invoice.

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What factors impact my credit amount?

● Qualifying time period.

● Employee earnings & healthcare expenses.

● How much PPP forgiveness period overlaps with ERC qualifying quarter(s).

● % of PPP, FFCRA funds applied to wages.


Calculating your 2020 ERC

Wages paid to employees

Medical + Dental + Vision costs

(FFCRA leave benefits)

(PPP $ claimed as wages for employees in Forgiveness application)

(Other covid relief programsor government aid)

Qualified Wages

50% of Qualified Wages (capped at $5,000 per employee)

You are eligible for 50%of each employee’s Qualified Wages,up to a maximum of $5,000 / employee.

Only wages not already fundedby PPP, FFCRA or other government program qualify.

ERC


How can I maximize my ERC credit?

Company Y

5 Employees

Partial Suspension:Q2, Q3, Q4

PPP loan = $16,100(100% forgiven)

Basic CalculationNET ERC = $9,400*

ProService Optimized CalculationNET ERC = $10,500*(+12% > Basic)

ERC Calculation Options:

*NET ERC includes PSH ERC fee: 6% of ERC credit amount per entity per quarter, min. $1K, max. $5K

Forgiven PPP +Optimized ERC

Total Maximized Relief Funds

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02$16,100$10,500

= $26,600


How can I maximize my ERC credit?

Company X

47 Employees

Full/Partial Suspension:Q2, Q3, Q4

PPP loan = $146,000(100% forgiven)

Basic CalculationNET ERC = $90,000*

ProService Optimized CalculationNET ERC = $118,000*(+31% > Basic)

ERC Calculation Options:

*NET ERC includes PSH ERC fee: 6% of ERC credit amount per entity per quarter, min. $1K, max. $5K

Forgiven PPP + Optimized ERC

Total Maximized Relief Funds

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02$146,000

$118,000

= $264,000


Your Next Steps

Complete theOpt-in

Questionnaireby July 2, 2021

Complete the ERC

questionnaire& upload

supporting documentation

by July 14, 2021

Sign the ERC Agreementby July 16, 2021

PSH certifies your documentation, maximizes your calculated ERC

credit, and contacts you if any actions

required.

Await credit from IRS

Image of FormFill screen-shot

which makes it look impressive,

comprehensive, easy

Amount ofCredit

Max Amount of Credit Available

Gross Receipts Decline Test

20212020

At least 20%

Compared to same quarter of 2019

$7,000per employee, per quarter

$28,000per employee, per year

70%of qualified wages (including cost of health benefits)

At least 50%

Compared to same quarter of 2019

$5,000per employee, per year

50%of qualified wages (including cost of health benefits)

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