Many companies are taking advantage of those who need the most help by charging between 20 and 30% of the amount of the Employee Retention Credit (ERC) reimbursement in exchange for helping the company submit the documentation. The Internal Revenue Service (IRS) has made it clear that the federal employment deposit is not required if there is a reasonable expectation that an ERC is expected. To qualify for the ERC, a company must be able to demonstrate that their operations were completely or partially suspended, or that they experienced a significant decrease in gross revenues. Companies who need or want cash should now adjust their federal payroll tax deposits by the amount of ERC they reasonably expect to receive. Payroll companies are not helping companies determine what the qualifying salaries are per employee, but since the ERC is a payroll credit, companies can receive the credit and reimbursement more quickly since payroll forms are submitted quarterly.
This could be the lifeline some companies need to survive. The general rule governing the ERC for eligible employers states that essential businesses do not meet the requirements. However, an important exception to this rule is if suppliers of essential companies cannot deliver critical goods or materials due to a government order requiring them to suspend operations. Payroll companies have adjusted their systems accordingly to properly record qualified wages per employee. For example, if production in California is interrupted due to state restrictions and an Ohio manufacturer (considered an essential business) cannot operate normally due to a lack of material, they could be considered an eligible employer for the ERC under partial suspension guidelines. Part-time employees' hours can be added up to form an equivalent of full-time employees, which will likely allow companies to have fewer employees for the ERC than they reported for the Paycheck Protection Program (PPP).
Some companies may not be evaluating the ERC now because they don't believe that it can be claimed until they file Form 941.