(BPT) - By Jay Woods, Founder & President, Omega Accounting Solutions
Small business leaders continue to encounter difficulties and shortages that began during the pandemic. They struggle with labor shortages, supply chain issues, inflation, a potential recession, and insufficient financial guidance while working hard to keep their businesses running.
About the ERC
The federal government drafted up economic parachutes to keep businesses afloat in the aftermath of the COVID-19 pandemic; however, many business leaders are struggling to find the cord. One such program - the Employee Retention Credit (ERC) provides qualified businesses a tax refund to recoup some of the money spent on overpayment of payroll taxes during the pandemic. The ERC allows qualified companies and businesses to reclaim a portion of the money they paid to the IRS in payroll taxes.
To better support small business decision-makers, Omega Accounting Solutions commissioned a national study of general managers and executive management team members to determine their thoughts on the ERC. The results demonstrate their disappointment with misinformation and a lack of clarity and even integrity with ERC processors, leaving decision-makers both disillusioned and confused.
'Although the popular Payment Protection Program fund offered about $800 billion in aid to small businesses, the ERC Tax Credit is almost three times that size - approximately 2.1 trillion,' said Jay Woods, Founder and President of Omega Accounting Solutions. 'A survey of small business owners revealed most are misinformed about the ERC. With the rolling sunset deadline approaching in early 2023, businesses are running out of time to file. ERC funds may help businesses remain operational during ongoing economic hardship.'
Overall, the survey found that decision-makers are frustrated with the ERC, the U.S. business climate, and a perceived lack of support from financial experts.
Other findings include:
- 81% of business leaders and decision-makers indicate business is suffering because they don't have the accounting or financial direction they need
- 31% of survey respondents say that the tax or financial experts who typically assist with their business's tax needs did not provide accurate/enough information about the ERC
- 45% believe they are ineligible to claim ERC benefits because they already applied for a Payment Protection Program (PPP) loan
- 89% say that between the pandemic, inflation and labor shortages, they feel it is nearly impossible for small businesses to thrive in today's economy
- 89% say the surge in operating expenses and/or the cost of goods have made paying employees a competitive wage unaffordable
Omega analysts believe these survey results indicate that small businesses are often underserved when it comes to tax credits. Most executives lack expert guidance in accounting and finance, leaving them to rely on outdated information or form misconceptions that may prevent them from utilizing tax advantages.
Adequate ERC guidance is one of the biggest issues for decision-makers but by no means the only obstacle they face. Federal sunset deadlines will begin rolling out in March 2023, shortening the three-year claims window for qualifying businesses in each subsequent quarter. There is also a significant backlog of ERC claimants waiting for their refunds. Current reporting from Experian highlights processing delays resulting in more than 286,000 unprocessed refunds that can take up to a year to reach recipients.
Finding the Right ERC Partner
As many small business leaders have already discovered, successfully claiming the ERC is difficult without the right partner. There is rarely anybody at their side, ready to explain the ins and outs of the process, helping decision-makers to understand the qualification or application process, and ensure their filing is protected in the case of an audit. Fortunately, there are accounting firms that specialize in the ERC, offering support throughout the entire filing process. Small business owners should ask the following five questions before selecting their ERC partner.
- Is the company established?
- Does the company have experience processing ERC refunds?
- Does the company have a thorough qualification process?
- Does the company have a proven record of success?
- Does the company charge reasonable upfront fees?
Read the Survey
To learn more and explore the rest of Omega's findings, download the survey now.