If you’re a business owner, you’ve probably heard the ads, you’ve probably had numerous calls and oh my gosh the ads on social media, the radio and TV are just too much.
The problem is that it creates a lot of confusion around this amazing program and leads a lot of business owners to opt not to pursue it but that’s a big mistake. Mostly out of concern about choosing the wrong path.
The good news is that I’ve spent way too much time researching this program and I don’t even qualify being self employed.
I’ve decided to go down the rabbit hole on this because I saw an opportunity for business owners that could actually, not figuratively, be that once in a lifetime chance at free government money in these huge amounts.
And obviously since I’m a real estate lifer, I’m always looking at how to leverage opportunities to turn them into real estate income.
Of course we’re talking about the ERC program. Yes the same one everyone and their brother is promoting right now.
But don’t be overwhelmed by the number of ads. I’ve done the research for you and I’ll help clarify why there’s so many ads right now.
What is ERC?
For those of you who don’t know, when the pandemic started and they came up with the Cares Act, there were provisions to help small and medium sized businesses survive.
There was the popular PPP (Paycheck Protection Program) that most business owners chose over ERC because of the ease of qualifying. Since then most PPP Loans have been forgiven. Next was the ERC (Employee Retention Credit). Most business owners did not pursue the ERC program because back then it was an either-or proposition. You could get either PPP OR ERC but not both. ERC was very restrictive so most went with PPP.
Well since then, the Consolidated Appropriations Act of December 2020 changed all the rules. First, they made it so that even if you did get a PPP Loan and it was forgiven, you can also now get the ERC program. And from what I’ve seen, the ERC program is providing a whole lot more cash than the PPP program ever did.
The super simplified version is that you can qualify for up to $26,000 PER W-2 employee that worked for you in 2020 and 2021. And yes part time employees count.
My opinion is that every single business owner has a moral obligation to get this money and use it for the good of the local economy as opposed to leaving it there for politicians to squander when the program comes to an end.
The Unintentional ERC Scam
During my research I have 100% come to the conclusion that there are very few companies that I would ever let file my ERC for me (If I was eligible). I wouldn’t even let my own CPA file for me and for God sakes I would not even think about letting a payroll company touch it.
This is something that truly requires a specialist. And when I say specialist, I mean like if you were accused of committing a very serious crime, you’re not going to hire your compliance attorney to handle the case for you because they’ve always done a good job in the past and they’ll do it for less. No, if you could, you’d hire the most aggressive attorney with the best track record anywhere to keep your butt out of jail. Likewise when your Primary Care Physician says “Hey you have a brain tumor, I’ll see you in the operating room in two weeks” you’d run like you’ve never run before. You’d want the best brain surgeon in the country that has successfully removed thousands of tumors over the last couple of years.
It’s the same when you choose someone to do your ERC Filing. I’ve come to learn that they typical CPA, Bookkeeper or Payroll company does not have the timer or energy to sift through the 6,000 pages of legislation to understand every crazy nuance our beloved politicians built into the program.
Yet they’ll still offer to file for you either out of a sense of obligation or just the fact that it’s an opportunity to make a few bucks. The best ones are referring out to one of the high level ERC filing specialty companies so they can stay focused on their own business.
After all this is not strictly a tax issue, and it is not strictly a payroll issue. It’s a combination of those with a little political seasoning thrown in. So to effectively file, you need someone who understands this.
And this is why I address the issue of having your CPA, bookkeeper or payroll company under the heading of ERC Scam. But to be sure it is not an intentional scam but the results are the same nonetheless.
Here’s an example. I told one of my friends about the ERC program and they needed to file right away. I explained that the two companies that I recommend charge a contingency fee. He was totally fine with that especially since he was never going to see that money until I told him about ERC. But he wanted to consult his CPA. Keep in mind that about a year had passed since the rules changed opening up the eligibility to most businesses.
The CPA, made statements like it’s unethical for a company to take a percentage for doing work upfront. He also pointed out that those companies had only been in business for about a year. LOL. ERC at that point had only been around for a year so…uh…yeah! Then the CPA said he would file the ERC documents for my friend for an upfront fee of 5,000 dollars as I recall (because that’s apparently more ethical).
Keep in mind that after learning everything I had learned about the program, I realized that what the CPA did was in fact truly unethical. How? To start with, the CPA at that point had never filed for ERC even once up to that point. Secondly, the ERC rules changed a year earlier yet the CPA never notified his client about this opportunity to infuse a huge amount of cash into their struggling business. Finally, because my friend was the skeptical type, he chose to write a check to his CPA. After all it just makes sense. You’ve used the guy for years, he’s always done a good job with your taxes and you trust him. At the time it didn’t matter to me because I didn’t know any better and I didn’t have any skin in the game other than seeing my friend benefit. But the results were like having your primary physician perform your brain surgery.
The CPA ultimately filed for my friend. My friend had 22 employees. The CPA was able to get approximately $10,000 per employee. My friend finally received his checks totaling approximately $220,000. Not bad right? Well, in this scenario it was terrible. When he told me, I asked why he didn’t get much more since they were all full time employees and they’re eligible for up to $26,000 per employee before any adjustments. His answer was simply “I don’t know”.
I convinced my friend to have this other company review the filing. The end result was that they actually qualified for an average of $21,000 per employee, had a guarantee that the filing was accurate, had a $1,000,000 E&O policy provided by the company in case of any errors AND had a 5 year audit protection guarantee. And for this they would have paid a 20% contingency fee if they would have just filed with the specialist company.
Let’s compare with 22 employees.
CPA: Avg $10,000 per employee x 22 employees = $220,000
minus $5,000 filing fee =
net $215,000
Specialty company: Ave $21,000 per employee x 22 employees = $462,000
minus 20% filing fee =
net $369,600.
A difference of $154,600.
It’s easy to see the difference and I’ve seen it quite a few times already.
So Mr. CPA, what’s less ethical? End of rant on this part. Point made.
Fully Intentional ERC Scam
Whenever there’s money on the line, criminals, scam artists, shysters and all sort of other nefarious sorts will show up and try to take your money.
There’s two prominent forms of Scams surrounding the ERC program but keep your eyes open. Undoubtedly because of the amounts involved, there will be more.
Didn’t want to but whatever…
Very similar to the unintentional scam but this is where CPA’s, Bookkeepers, Law firms and others are fully aware that they are not the most qualified, are going to get you a much lower return, will probably file so poorly you’ll still get money until the IRS audits your file and forces you to return the money including interest and penalties.
They know there’s no way possible they are serving you at the highest level. But you probably won’t complain because you’re going to still get a big chunk of money right?
If they can make a bunch of money now and just dissolve their LLC or corporation just in time before everyone starts suing them for incorrect filings it doesn’t matter. Too bad, so sad.
And there’s a ton of these out there. Even the IRS warned employers of scammy practices like this. See it here. https://www.irs.gov/newsroom/employers-warned-to-beware-of-third-parties-promoting-improper-employee-retention-credit-claims.
An exiled prince sent you a check from Amazon about your Auto Warranty…
When it comes to money, people get creative don’t they? Someone, if not many someone’s will do everything in their power to take every penny they can from you. Be vigilant. Before you agree to anything take a little time to do some research. Look up reviews. Do a search to see how long their website had been around. If they in a licensed capacity, see how long they’ve had a license etc.
I mean after all we’re talking about tens of thousands on the low end and millions on the high end. You don’t want to be the one when someone asks, “did you check…?” and you shake your head sick to your stomach because all that money you were planning on using to build something better ended up in a foreign country.
Who Do I Recommend?
These are the two companies I highly recommend for ERC.
I’ve personally researched them in a lot of detail and in my opinion, these two are the best options.
Jorns & Associates
These guys take mostly just word of mouth clients. They are very conservative and highly accurate. They guarantee their accuracy. They Eat Breath and Sleep ERC.
Watch the 5 minute video, register on their site (there’s no cost or obligation) and then you’ll get an email that gives you additional instructions and you can look at the engagement letter. then decide if they’re the best choice.
Unlike a lot of other companies they probably won’t even give you any numbers until you provide documentation because everyone out there is throwing out numbers around just to get you excited and then let you down when it doesn’t happen.
They take a 20% contingency fee (Kind of like real estate commissions). They’ll do the work upfront and only charge you if you get paid.
They guarantee that their numbers are accurate after they’ve reviewed your documentation, they have a 1 million dollar E&O policy for each filing they do and they will give you audit protection for 5 years. That’s worth it alone. No one else offers this.
But…they do have a 100% refundable engagement fee of $2,600. They do this to make sure they are only working with serious businesses and not oversaturated so they can make sure you are getting the best results.
The $2,600 is also credited to the 20% contingency fee so it’s not an actual fee, it’s just part of the 20% in the end.
In my opinion these guys are the best of the best. If I were eligible this is who I’d have file my ERC.
ERC Specialists
This company was one of the first major companies that started to focus solely on ERC. As a result they too are able to make sure they are in compliance.
You can register on their website as well and go through their survey and it will give you an estimate of what you might expect for a return.
Keep in mind these numbers will change as soon as you submit documentation so don’t get hung up on them.
They take a 15% contingency fee. Again they’ll do the work up front and wait to get paid. Or if you want to do their Pay Now option they only charge you 10% that you pay only after they’ve completed their analysis.
The only reason I put them as the second best option is because they don’t provide audit protection after the fact, that I know of.
If I could, I would only recommend Jorns and Associates because they are the best of the best but I know they have a higher fee and they have the engagement fee. A lot of people are not comfortable with that because they just don’t understand the value.
That’s why I recommend ERC Specialists second. Not to say they aren’t good at what they do, just not as good as Jorns and Associates.
And remember NO ONE can give you accurate numbers until they’ve done a full analysis of your documentation.
I’ve sent several people to both and have had good results with both.
I’ve spent too much time researching all of this stuff so if you have any questions, don’t hesitate to call me.
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