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We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.

Steven Jarvis:     Hello everyone, and welcome to the next episode of the Retirement Tax Services Podcast, financial professionals’ edition. I am your host, Steven Jarvis, CPA.

And this week on the show with me, I have a fellow CPA, Ben Dorsey, who specializes in working with businesses on tax credits. So, Ben, welcome to the show.

Ben Dorsey:        Yeah, good afternoon, Steven. Thanks for having me.

Steven Jarvis:     Yeah, of course. Why don’t you share a little bit more about your background, and then we’ll dive into kind of what you currently focus on working with business owners.

Ben Dorsey:        Yeah, absolutely. I spent about the first decade or so in my career, strictly on tax compliance, working in some local CPA firms, global CPA firm, and really focusing on the high-net worth individuals and their related filings, gift tax compliance, estate filings, things of that nature.

Shifted more to the second half of my career to more of a hybrid tax director and wealth management firm, focusing on making well-rounded financial plans that are in unison, in sync with holistic financial plans.

Found this recent opportunity to really dive into the Employee Retention Credit, help businesses that may have been impacted during 2020 and 2021, as it relates to the COVID-19 pandemic.

Steven Jarvis:     Yeah, so definitely some deep experience there, which I always love to see. Everyone’s going to start the career at some point, but there’s so much you learn from those years of experience and seeing it in practice.

And I think what gets missed sometimes for people outside of the profession is that even though we’re going to talk about the Employee Retention Credit here for the rest of the episode, even though that was just created within the last couple of years, those additional years of experience really help with just in general, understanding how to approach these things with the IRS and different tax laws.

And so, the Employee Retention Credit or ERC is brand-new, but those years of experience you had before that, I’m sure helps with how you engage with clients and how you help them maximize this particular opportunity.

Ben Dorsey:        Absolutely. And especially, when you’re seeing a lot of these businesses that are receiving the credit are small businesses that were deeply impacted by the COVID-19 pandemic, the mandates, their declines in revenue, their supply chain issues.

And so, it’s actually being able to relate to them as an actual human, not just as a financial or tax advisor, but also, understanding what it’s like to run their business to be in their shoes, and how impactful things were.

We’ve had clients and prospective clients that almost went out of business during COVID. These funds we’re able to recoup for them are very impactful, meaningful, not only to the ownership of the business, but also, to the staff and keeping good people around, making sure your business model is updated and constantly competing in the new world.

Steven Jarvis:     Yeah, it’s always so interrelated. Now, I want to clarify, as we jump in, that while this came out of some of the COVID-19 stimulus that happened, this is completely separate from the Payroll Protection Program, the PPP money.

That’s what got a lot of the headlines. It still gets a lot of headlines, but this is completely separate. So, don’t just write off the rest of the episode, because you’re like, “Ah, I took care of that a while ago.”

Even though you led by talking about 2020 and 2021, the reason we’re having this conversation is that there’s still a window for people to go back and claim this credit. It’s actually potentially large opportunity.

Ben Dorsey:        Yep, absolutely. So, it was part of the CARES Act of March of 2020, which as you said, had the PPP loans as part of the legislation. There are also a few other programs; Economic Impact Disaster Loans or EIDL, Restaurant Revitalization Fund.

And then the Employee Retention Credit is the last of all these programs that still has funding available, and the businesses that if they’re eligible, can still file for to receive. And it’s a tax credit, but it’s fully refundable.

So, it’s an actual check that the business gets from the IRS. It’s not an offset against future liabilities or carry forward, or carryback — it’s actually check-in-hand from the Department of Treasury.

Steven Jarvis:     Now, I’m going to demonstrate the fact that just because someone’s a tax expert, doesn’t mean they’re an expert on all things, because I’m going to genuinely ask you a question I only mostly sure know the answer to.

One of the other interesting things about the Employee Retention Credit (and please correct me if I’m wrong) — but this didn’t just necessarily offset income tax, but it can also offset just payroll taxes.

And so, even for companies who in 2020 and 2021, maybe didn’t have a large income tax bill or any income tax bill, if you had employees and you were paying payroll taxes, this could potentially offset some of those as well, right?

Ben Dorsey:        Yeah, absolutely. So, the credit itself is claimed on a form 941, in this case would be a 941-X on an amended return to claim the actual credit, any period of eligibility. So, we’re looking at four periods of eligibility in 2020. So, it’s all four quarters in 2020 as well as the first three quarters in 2021.

And as you said, it’s a refund of wages and payroll taxes paid during your quarters of eligibility. So, it’s not just limited to the payroll taxes themselves that typically the employers have to pay on behalf of their employees, but also, a refund up and above and beyond that amount as well. So, it’s an actual cash refund in this situation.

Steven Jarvis:     So, Ben, let’s start talking about who this potentially applies to because there’s potentially a lot of different businesses that might be eligible. So, how do advisors listening either for their own business or for clients they work with start saying, “Okay, is this something I should be looking into?”

Ben Dorsey:        Yeah, absolutely. And there’s a lot of disconnect and misinformation in the industry amongst business owners, amongst advisors, CPAs about the program.

The first is since it was part of the CARES Act and part of the PPP program, at the onset of the both programs, PPP and ERC, the IRS said you had to pick one or the other, you couldn’t do both. And so, a lot of people heard that initial headline, went the route of PPP, and then they overlooked ERC.

So, not only the business owners themselves, but also, a lot of their tax professionals, CPAs, advisors, because everybody went one direction, so why look the other?

So, fortunately, my partner and I, we’ve been in this space specifically on CARES Act programs since the onset in 2020, and we’re not really catching up the speed. We’ve already been building out the templates, the resources, and research and knowledge on this.

So, in terms of businesses that will potentially be eligible, we’re looking one, for a first eligibility criteria based on a substantial decline in revenue. And so, what we do is we look at 2019 as a base case and we look at quarterly revenue. So, it’s not profit or loss, it’s not net income. It’s strictly based on gross receipts and whichever method the business files their tax return.

Whether it’s accrue or cash basis, looking at those same quarterly revenues in 2020 and 2021 for the corresponding quarter, looking for at least a 20% decline in some quarters. And in other quarters, you need a 50% decline.

But the easy news is if you don’t find 20, you’re not going to find 50. That first test is what a lot of people hang their hat on when they’re looking at ERC, whether it’s business owners themselves or their advisors.

And they think, “Oh, okay, well, we actually had stable revenue or we had a little bit of a drop, but not enough. Or maybe our revenue grew, maybe it turned out financially to be a great year, so, oh, we’re not eligible.”

And so, unfortunately, a lot of CPAs even hang their hat on, “Oh, I looked in my client’s revenue, they didn’t have a reduction or they didn’t reduce enough or they quadrupled their revenue. They’re not eligible.”

So, fortunately, that’s not accurate. And that’s why part of the reason we’re here today, is to talk about the second independent test, which is based on looking at government mandates that impacted a business’ normal operations.

So, an example of that, that everyone points to is a full-service restaurant. So, if you look at 2019 for a full-service restaurant, you’re going to see dine-in customers and also carry out and delivery.

And then touching base in March 2020, we’re seeing indoor dining room closures once the pandemic hit. So, then in some jurisdictions, indoor dining was completely closed. In some jurisdictions, it was reduced capacity to say 50% or 25%.

Regardless of whether it was a full closure or a partial closure of indoor dining, from the date that mandate was put in place, the impact in indoor dining to the date it was fully rescinded, the business would be eligible for the Employee Retention Credit.

Now, mind you, a business may have had a growth in revenue. Maybe they put in a really nice outdoor patio. Maybe they did really well on carry out and delivery, and they wouldn’t pass the revenue decline test. The mandate test is separate and independent, and so they would be eligible from the date the mandate came into play to the date it was fully pulled back.

Now, it could have been put in place by a federal, state, city, county, or health department order, but it has to have come down from some type of formal government mandate of some sort. It can’t be based on fear.

It’s not, “Oh, my customers are afraid to come in and eat, so our revenue went down or things were impacted, or my employees didn’t want to wear a mask.” It has to actually be based on that mandate itself that we have to find from some executive order.

Steven Jarvis:     So, I think the important takeaway here for people listening is that these are two separate criteria. It’s not “and,” it’s “or.”

And so, as you think back either again, either to your own business or clients you work with — if in 2020 or 2021, there were large declines in revenue, which these are substantial. This isn’t, “Hey, I made slightly less money.” This is large declines in revenue.

That’s one thing you might look at, but then that other piece is, were we impacted by any of these mandates regardless of the government agency it was coming from; was there some kind of formal mandate that impacted your business?

And if either of those is true, then we’re going to keep going down this path of, “Hey, does it make sense to go ahead and file for this credit?” Because at this point, we are talking about amending returns. We’re talking about going backwards and saying, “Hey, do we go back and catch this up?”

Ben Dorsey:        Yep, absolutely. So yeah, the first step is determining which of those seven periods of eligibility is on the table, whether it’s by revenue decline or by mandate. So again, all four quarters of 2020 in the first three in 2021.

Once we determine which quarters are on the table for eligibility, then we’re looking at payroll that was processed to W2 employees on a quarterly basis up to $10,000 per employee will count towards the calculation for the credit itself.

Steven Jarvis:     So, up to $10,000 per employee. So, we’re not talking about small dollar amounts here. I mean, this is potentially a very impactful credit for businesses that are eligible.

Ben Dorsey:        Yeah, absolutely. So, the 2020 ERC credit is worth up to $5,000 per employee. So, it’s 10,000 per employee per quarter. And so, an employee that makes over $40,000 a year in gross wages would then likely fit that criteria of 10,000 per quarter per employee.

So, the 2020 credit is worth 5,000 per employee per quarter, and then 2021, it jumps up substantially to 7,000 per employee per quarter.

Steven Jarvis:     Wow. Yeah, that’s not small dollars. Ben, as you look at businesses that you’ve been able to help with this process, aside from just the eligibility criteria, are there other common themes you’re seeing that might help listeners identify businesses who this might be a good fit for?

Ben Dorsey:        Yeah, absolutely. So, businesses that have physical presence, so think of physical retailers. So, places that would’ve been more heavily impacted by mandates than others.

So, businesses that are online or that work remotely, typically not seeing as much traction on when it comes to ERC evaluations and eligibility, but businesses that rely on in-person ways to interact with their customers.

So, again, restaurants, in-person retail. We’re seeing the medical and dental community because a lot of those practices had the closures of their waiting rooms or the reduction in their capacity of their waiting rooms.

In certain jurisdictions, they suspended elected procedures. So, you could still maybe go to the doctor, but you couldn’t get something that wasn’t medically necessary at that moment.

Entertainment venues and child recreation facilities, so a lot of those facilities were either closed completely or they had very strict guidelines and capacity limitations.

Essentially, the businesses that would be harder to fit into the criteria when we’re looking at mandates typically, are in agriculture because a lot of those businesses were deemed essential — construction, and then shipping and manufacturing of goods.

Not that it’s saying that those businesses couldn’t find eligibility, it’s just not as easy to latch onto the mandates that would make them eligible.

Steven Jarvis:     Yeah. So, definitely a wide spectrum of potential types of businesses that were impacted. I mean, it’s a really great and specific example you gave initially about restaurants, but it goes way beyond just, “Hey, I had a restaurant that was impacted by COVID.”

There’s a whole variety of businesses that could potentially benefit from this.

Ben Dorsey:        Absolutely, and it doesn’t even necessarily have to be at the physical location of the business in operation itself.

I’ve seen clients that have multiple streams of revenue, but one of them was related to selling medical devices, and they actually would go in person to hospitals and do demonstrations of the new blood pressure cuff, or the new heart monitor for the nurses and the doctors and the medical staff.

Well, during COVID, in most jurisdictions for a period of time, they didn’t allow third party vendors inside hospitals. So, even though that business in particular had other streams of revenue, was able to keep things stable. They focused on online sales, they shifted to other ways that they would normally generate customers and revenue pre-COVID.

The fact that they were barred by mandate from entering the facility where they would typically service their customers was another way in.

Beyond that, people and businesses that rely on large trade shows and gatherings to market and present their products to the public for consumption and for purchase, a lot of those, there were suspensions of large indoor gatherings across the country that said, “Oh, we can’t have conventions and trade shows and expos because there’s no gatherings over 50 people or no gatherings over 200 people.”

And so, again, there’s a very wide spectrum, as you said, as to who might potentially be eligible, and the manner in which they may be eligible. And it’s not just based on the actual physical location of the business itself.

Steven Jarvis:     Lots of great things to consider in there. So, as we’re recording this, it’s August of 2022, we’re obviously well past 2020 and 2021. So, what kind of timeline are we looking at for when people need to take action on this?

Ben Dorsey:        Absolutely. So, the 2020 quarters that a business would be eligible for, have to be filed for no later than April 15th of 2024, and the 2021 quarters have a deadline of April 15th, 2025.

Now, that being said, depending on how long you’ve been in practice, or if you’re specifically on the tax side, the IRS, in their grade way of operating the organization, they don’t come out as far as in most legislation, go backwards.

And so, if a client has filed for and received their Employee Retention Credit, let’s say the IRS six months from now comes out and says, “Oh, we’re changing some of the criteria” and maybe that business would no longer be eligible under the new criteria — if they’ve filed for and received it, the IRS doesn’t come knocking on your door and ask for it back.

And so, while the runway itself has some time left, about one and a half to two and a half years, we encourage our clients, prospective clients not to sit on this too long because any change that come out would likely be proactive as opposed to retroactive.

And so, if you filed for it and received it, your check’s in the bank and case closed. So, nobody benefits by sitting and waiting.

Steven Jarvis:     No, that’s great perspective, especially when we’re talking about getting money back, every client I work with would rather keep control of their money as opposed to letting the IRS keep a hold of it. So, that makes a lot of sense.

What does the process look like? So, for someone listening, who says, “Oh, wait, I’ve got my business, my client, they’re probably a fit for this, what do they do?” I mean, this isn’t go online, click a button and receive a check. Like what do you have to do to actually claim your credit?

Ben Dorsey:        Yeah, absolutely. So, one, whether it’s in our firm or another CPA or law firm, we do encourage businesses that are considering looking into this or their advisors to definitely use a CPA firm or law firm for the analysis.

If you were to google ERC, you would find 10 to 20 firms that would come up right off the bat. Most of them would not be CPA firms or law firms. Unfortunately, there are people that are short-cutting the calculations and the filings, and really not doing their clients a good service about potentially opening them up to risk in the future.

So, in terms of the process itself, once you find somebody that you’d like to work with; whether it’s your normal CPA or through a specialist that you’ve been referred to, starts with an initial conversation.

Again, talk a little bit about what we’ve talked about on this conversation today about the background of the program, how it works, then transforms into a document request.

The document request itself looks fairly straightforward. So, a few payroll report requests, revenue report requests, PPP information is needed. If a business didn’t receive those funds and basically, a summary of where that business is operating and servicing customers.

So, after you’ve gathered that initial information, then the firm you’re working with should be able to evaluate the eligibility, one, to determine if you’re eligible and then two, for how much. And that’s going to be determined based on, again, that revenue decline test and the government mandate test — either/or.

And now, mind you, there may be some quarters of those seven that are on the table that you’d be eligible in both fashions for a revenue decline and mandate. That’s not worth anymore than just being eligible by one, think of it as there’s one ticket to the dance. Two tickets doesn’t get you to two dances, it’s just one.

But you do want to get invited to as many dances as possible. So, we’re looking to get to seven at the end of the day. But then it’s not an all or nothing — you might be eligible for one quarter of seven, could be three, could be all seven. So, the more the merrier.

Steven Jarvis:     So, there’s definitely a due diligence and data gathering process. There’s let’s evaluate what you’re actually eligible for, how many of these quarters, what’s the dollar amount each of those quarters.

And then once all that information’s gathered, the analysis is done. Then you mentioned earlier, you’ve got to go back and amend 941s. You got to essentially refile these forms for prior years.

Ben Dorsey:        Yep, absolutely. So, quarterly, every business files a 941, which is a quarterly payroll tax return with the IRS that reports the wages and the withholdings that were paid to employees during that previous calendar quarter.

To claim this credit, once you determine which periods you’re eligible for, which calendar quarters, and the amount associated with each, then you do have to go back as Steven said, and amend to file for the Employee Retention Credit, and prepare a 941-X as an Xavier to actually make the claim itself.

It’s a paper filing. It’s not done electronically the way that most tax returns are done these days. So, it does take a little bit more old-fashioned elbow grease to get a pen or pencil and actually fill out the form. But the actual filing itself does go to the IRS by a paper filing.

An additional thing about it, that’s good working with a CPA firm, if they have access to the IRS computer database, that allows them to track the client’s actual filing. So, a firm like ours actually knows when the IRS receives the filing, when they assign it to an employee to review it, and then when they process it and actually issue the check.

So, we’re actually are able to monitor everything soup to nuts. There’s some organizations that don’t use that service, and they might not even prepare the actual filings for the client. They may just give you the calculations themselves, and the client then has to turn around and give them to their payroll tax provider or their own CPA to do the filing.

So, depending on the organization and their structure, they may do everything for you, they may do very little or somewhere in the middle.

Steven Jarvis:     Yeah, it’s definitely a multi-step process. And there’s a lot of areas within taxes that I totally understand why people want to be DIY-ers.

And Ben, you and I are both tax professionals; from my perspective, for everyone, there’s going to come a point where it’s okay, it’s time to just work with a professional. It’s not that I don’t think you’re smart, it’s not that I don’t think you’re capable, but there’s just some areas where you’ve got to have a professional on board.

And this is certainly one of them. If you’re listening to this episode and you’re tracking all of the foreign numbers and all the different things we’re talking about, and you’re like, “Yeah, I got this” — I would still recommend you work with a professional because there’s just so many places along the way that you can get tripped up.

So, whether that’s with a firm like Ben’s, or you find another professional that you get a clear understanding, here’s how much of the process they’re going to help with, this is one of those areas that you’re going to be really hard pressed to convince me that DIY is a good option.

Ben Dorsey:        Absolutely. So, and another thing about that is that I don’t know, I think I’m a little bit older than you Steven, but last time I checked, at least when I graduated a few decades or so ago, they didn’t teach COVID-19 accounting in undergraduate tax in the CPA school, wasn’t on the CPA exam. Hasn’t been on many of my CPEs afterwards.

So, what I would equate it to is a lot of times, a business might had a great accountant, which I hope everyone does. And that accountant likely knows how long you’ve been in business, what your typical profit margins are, what you’re typically making as an owner.

And I would think of them more as a general practitioner, which everyone should have a good general practitioner, but then when you need brain surgery, you go to a neurosurgeon. You don’t go to your general practitioner.

So, one good thing about a firm like ours and a lot of firms in this space, is that we’re not looking to try and poach clients from a traditional tax practice. So, we just come in as a specialist, we’re coming in, let us help you with this one very specific niche opportunity. And then let’s send you back to your general practitioner all fixed up.

So, there’s definitely a lot of places you could get tripped up on this. Given the amount of money that’s potentially on the table, we’re often seeing six and seven figure refunds depending on the size of the business and how many employees.

And there’s two ways you could kind of go wrong with that on the DIY approach if you were to do it yourself, and under short your reporting. You might short yourself a few hundred thousand or a few million dollars in credits.

So, trying to do it yourself and save money on the preparation fee may then cost you exponentially more on what you’ve missed out on the opportunity.

On the flip side of that, if you were to do it yourself or work with a firm that wasn’t as well-versed in the calculations as they should be, you could also expose yourself to claiming too much and then being exposed to a penalty.

So, any credits that were in excess of what you were eligible for, if the IRS were to issue a refund, say for a million dollars, and then two years later, they come back and say, “Oh, you should only gotten 500,000.”

Not only do you have to give the 500,000 extra back, you’re looking at a 25% penalty. So, 125,000 on top of it. So, trying to do it yourself to save money on the fee or to prove it to yourself that you’re really smart and a savvy person and good with forms could really do yourself a disservice.

Steven Jarvis:     Yeah, it’s certainly a little bit more of an extreme example talking about a large credit like this, but unfortunately, what you described there at the end is how the IRS works with just about everything tax-related.

And taxpayers get tripped up on this all the time. The software lets them submit a form and they’ll even get a refund and they’ll think I’m in the clear.

But the way the IRS system is set up, you can submit your tax filing, you can get the refund. And then to your point, years later, a couple years later (there are limits to it), but they can go back and then say, “Oh, even though we sent you that check, just kidding, you weren’t eligible for that. And now, you got to pay it back with interest.”

And so, it’s not just a fun, little guessing game of “let’s hope we get it right.” I mean, there are ramifications here if we get it too far wrong.

Ben Dorsey:        Yep, absolutely. And unfortunately, there are some less than reputable firms or I’ll call them businesses or companies because a firm I think should be reserved for certain quality and expertise.

But where they’ll even come in, I’ve heard examples where they’ll be interviewing a client for potentially ERC claims and say, “Oh how many employees did you have in 2020?” And they’ll say, “Oh, we had 15.”

And they’re like, “Well, we’re going to file you for 20.” It’s like, “No, no, no, but I had 15 employees.” It’s like, “Yeah, but we’re going to file you for 20.” It’s unfortunate that the business isn’t aware — they think they’re working with someone they can trust and that knows what they’re doing. And at the end of the day, as you know Steven said, that the IRS initially, many times will accept the filing, and yeah, they don’t take a second look at it until later, several years later, in some cases.

And unfortunately, a lot of the companies that are helping people with these calculations, I have a strong feeling that April 16th, 2025, when this is all over, they will not have a phone number anymore. You will not know what happened to them, what their names were, how to get ahold of them.

And so, unfortunately, a lot of businesses are going to get left — to deal with this themselves or they’d have to hire a new expert to try and dig themselves out of the trouble that the other firm got them into.

Steven Jarvis:     So, Ben, you raise a couple interesting points there. I mean, this is obviously a really unique opportunity that came up because of COVID, hopefully, we won’t have COVID 24 coming up here in the next couple of years.

And so, for people listening, if they haven’t already claimed the credit, they’ve never been through this before, and they’ll probably never go through it again. So, what does that kind of professional evaluation process look like?

What should they expect from a reputable firm as far as when they get charged, how much they get charged? Like what happens we get halfway through and it turns out, oh, no, I’m not eligible. Am I still out thousands of dollars for having done the evaluation? Just help us with how that might work.

Ben Dorsey:        There are several different models I’ve seen in the space. Some companies will charge you, let’s say, you have a hundred employees, they’ll charge you an analysis fee of let’s say 5 or $10 an employee just to one, determine if you’re eligible, and the answer may at the end of the day be no. And you would just be out that fee.

Typically, the firms that are doing that, if they do charge you anything up front, they will ultimately, credit the amount that’s paid-up front towards the total fee for the engagement if you are eligible and against the total fee that they’re going to charge you. I would say that’s not as common.

The most common model that I’ve seen currently is based on the firm does an initial analysis of eligibility and the credit amount itself. And then they determine a fee either some based on an hourly rate in terms of an hour’s expectation, and some based on a percentage of the refund itself.

Now, most CPAs in many jurisdictions across the country specifically where we’re based out in the D.C. area, we’re not able to charge a fee based on the percentage of the refund itself. Our ethics do not allow that.

And so, a firm like ours, we charge a flat fee once we’ve determined what the scope of the engagement’s going to be. And so, that’s going to be how many employees do we have to calculate for, how many PPP loans, how many jurisdictions are we looking at mandates? How many quarters of eligibility? How many if we have controlled group issues?

And so, a firm like ours, we do the analysis upfront at no cost or obligation. And it takes us about three weeks after we gather all the information, come back and say, “Great, Mr. and Mrs. Business Owner, you’re eligible for the Employee Retention Credit for X amount. And then now, our fee, which we won’t invoice you until you receive your checks in the mail as a courtesy.”

So, they don’t have to come out-of-pocket ahead of time, is going to be X at that point. Mr. and Mrs. Business Owner could say, “Thank you, but no thank you” and we would just wish each other the best. And they wouldn’t owe my firm anything.

Or they could say, “Great, I’d like to engage.” We would send them an engagement letter and start preparing the deliverables. So, there are a lot of different models and a lot of different ways that people are charging for it.

Again, a lot of the CPA firms are charging percentages, some as high as 15, 20, 25 and 30%. I think even some of the larger consulting firms that are well-known across the country are charging upwards of 25 to 30%, which to me, is aggressive. But everyone has their own business model and the way that they like to generate revenue from their customers.

Steven Jarvis:     For sure, especially with something that’s so new. And again, there’s not like a precedence for it. And so, you’re going to see a real variety of what’s happening in practice.

Ben, we always like to make sure that we take information and turn into value, which is by giving people action that they can take. And so, as we think about our conversation here today, I mean the first thing that stands out to me, is for advisors listening; if you have clients that are business owners, go back through this episode, do a little bit of research on your own, come up with your bullet points of how am I going to screen my clients.

But you absolutely need to look through your client list for any business owners to say, “Hey, is this someone who this should be considered for?” And worst-case, you’re going to use the dishwasher rule and tell your clients when this comes up, “Hey, great news. We went through, we evaluated this for you and you’re not eligible for it, but we’ll keep an eye on things in the future.”

So, the first step is going through your clients and saying, “Okay, is anyone potentially eligible for this?” So, Ben, what else would you recommend that people are doing as far as taking action around this Employee Retention Credit?

Ben Dorsey:        Depending on the relationship that an advisor has with their client, there’s definitely a lot of different ways they could kind of tackle it, as a lot in the space you work in, Steven, a lot of the advisors are more and more getting connected with the CPAs that a client works with.

So, if you have a relationship with the client CPA, you definitely want to probably nudge them in that direction to say, “Oh, have you looked into this?” And what I’ll say, is unfortunately, in the CPA space, we don’t like to admit when we don’t know everything.

So, again, as I talked about earlier, some CPAs are saying, “Oh, I looked at revenue, it didn’t fit,” there was no decline or it wasn’t enough, so it doesn’t work. So, if depending on the quality of the CPA that your clients are working with, you may even nudge them into trying to contact a specialist in the space to get a second opinion especially if it’s at no cost.

Beyond that, I see a lot of advisors benefiting from this one, just like Steven said, about if it doesn’t work out, there’s no harm, no foul. You look good for trying to have recouped some funds that your client may have been eligible for.

But if they do turn out to be eligible, there’s a decent opportunity that those funds may end up in their investment accounts for an extra opportunity to manage funds that the client recoups through this program.

So, not only can it be goodwill in terms of turning over stones for your relationship to keep that strong, but also, could lead to additional opportunities to manage additional assets as well.

Steven Jarvis:     Yeah, I love that recommendation to reach out to the clients’ tax preparers. And at least from my perspective, and I’m thinking about how advisors might reach out to me; the way I would recommend advisors do that is you can use this podcast as an example.

“Hey, I was listening to some CPAs talk about this Employee Retention Credit, and I would love to pay for an hour of your time to learn more about whether this is applicable to my clients.”

Because to your point, Ben, none of us like being totally done something wrong. And so, reaching out and saying, “Hey, have you taken care of this?” That’s going to put me on the defensive; saying, “Hey, I just wanted to learn about this,” “Great, let’s have a conversation.”

So, be intentional about how you’re wording that as you reach out to clients, or as you reach out to their tax preparers.

Ben Dorsey:        Yeh, absolutely. We don’t want to admit it, and then we can also certainly dig in and say, “Oh no …” I’ve definitely been put on trial by a few CPAs that they felt put off that someone was coming in and looking over their shoulder.

Again, in our case, we’re not trying to take their existing relationship on their ongoing a multi-decade relationship — just looking to come in, do a really good job in one particular setting, and make sure that client’s getting what they’re eligible for.

Actually, my firm is partnered with about a dozen CPA firms, half of which don’t even desire to share any fees on the engagement. They say “I’ve worked with my client for 10 years or 20 years, I don’t have the time or the desire or the knowledge or the staffing to help them with this special project, and I want to make sure they’re taken care of because they count on me to make sure they’re taken care of.”

In other settings, some of the client CPAs do want to get paid, they want to share in the fee for the engagement, which is completely fine. They’ve nurtured that relationship. They’ve been with the client for years, and they’re also taking the same position; “We don’t have the time, or the desire, or the resources, or the staffing or the technology.”

And mind you, this is a one-time engagement. We don’t want 2024 COVID to come into play. But this is one time. So, most accounting firms and tax professionals are based on a recurring revenue model.

And so, this particular setting for a business to try and capitalize on it and do a good job for their clients, they have to pivot their existing workload, teach their people how to do it, build the templates, the resources, the calculators, and research.

And it just doesn’t turn out to be a good use in most cases of their time for their existing business model. And so, it’s just a good opportunity to get introduced to a specialist and make sure you’re getting everything for your clients, they’re supposed to get.

Steven Jarvis:     Yeah, yeah. That makes a ton of sense. Ben, as we wrap up here, if there’s people listening who are interested in following up with you and your firm on this with clients that might be eligible, how can they get in contact with you and learn more?

Ben Dorsey:        Yeah, absolutely. So, our website is smartertaxplanning.com. And yeah, my name is Ben Dorsey — ben.dorsey@smartertaxplanning.com. And yeah, love the opportunity to help an advisor or client of advisor with talking about the ERC.

Steven Jarvis:     Ben, certainly, really appreciate you coming on the show. We’ll get all of that linked in the show notes for anybody listening in their car, who couldn’t write that down so that everyone has your contact information.

But really appreciate you coming on and spending the time with me today.

Ben Dorsey:        No, Steven, love the work you do, and keep it up, and thanks for having me.

Steven Jarvis:     Thank you. For everyone listening, until next time, good luck out there. And remember to tip your server, not the IRS.

We’re not overpaying. No, we’re not overpaying. We’re not overpaying anymore. The tax code’s complicated, boring, and overrated. You don’t want that, you want a pro. One thing that you should know: this is a radio show. It’s not tax advice, don’t take it that way.