Employee Retention Credit (ERTC) Updates

All right, well, good afternoon, everybody. Thank you all that have joined already, being very punctual today. I appreciate it. I'm sure we'll have some people that join over the next couple of minutes. Chris Ferretti is my co-host and will be just kind of letting people in and keeping people on mute maybe for most of this. We will, you know, allow people to come off mute for questions. Questions either at certain points during the conversation or at the end today. But do allow me to introduce myself. My name is Mike DeCannon. For anybody that doesn't know me, I'm a partner and COO at Korb Capital. We should have primarily all of our clients online today. If anybody has invited anybody else, another colleague, within the insurance industry or somebody outside of it. Club Capital is, is now the largest accounting and advisory firm for insurance agents in the country. Today we are focusing on the Employee Retention Tax Credit. So we have been getting a lot of questions about this from a lot of clients. And so we have been digging into this is actually something that has been around for quite a while. But there's been a lot of changes to the rules here that making it much more applicable to, uh, to business owners and to our clients across the country. So we want to make sure that, that we address it. Um, and so what we are going to do today is kind of go through what, what we've learned, um, to be able to get the information over to you, um, to be able to make the decision on, hey, do I, do I qualify for this? Am I eligible? If so, what are the next steps? Okay. Um, yeah, thumbs up or Chris, um, for everybody just to double-check everyone can see my screen here. Chris, are we all good?

Yep, we're all good.

Okay, all right, so today's conversation, um, uh, we'll cover just what is the Employee Retention Tax Credit if we haven't heard about it, um, is my agency eligible for the ERTC, um, so for short ERTC, um, how to apply to receive my agency's tax credit. What's the expected timing to receive a tax credit from the IRS? Should you go ahead and apply? And then obviously, how can we help? So how can Club Capital help in this in terms of just overall kind of advisory guidance or full-blown kind of sending in kind of the application to be able to claim this? So for anybody that is from outside the insurance agency world, if anybody is there that happens to be on this call, this is going to come from a very insurance agency-specific realm since we only focus on insurance agencies across the country. So where we talk about business, we might be talking about agency, and there's some certain things that, that are in the ERTC that is a general kind of business stimulus package from the government that pertain to government organizations, nonprofits, etc., we just cut that out today. We are focusing specific on insurance agencies, so if there's anybody from outside the insurance realm, just know this is catered specifically to the insurance agency world, if you will. So a—

ooh.

So quick 101 on the webinar today. We are recording today's session. It will be sent out after today's call, so either later today or towards the end of the day here today or tomorrow morning for anybody here as well as anybody that missed the call today. So if you have some colleagues that weren't able to make it, they will be able to receive this. It should be a link going directly to their inbox as long as they're a client of ours or have signed up for the webinar today. We welcome your questions, so please, I would say throughout the conversation today, please use the chat box. Chris Ferretti, our operations manager here, will be helping me moderate that, and then we'll go through those at the end. And if you do raise your hand, you know, in Zoom at the end, we will try and call on you if you have a specific question that would be good for the overall group to hear, and we can address that then. Quick disclaimer here, so the information provided is not intended to be legal advice. We are not attorneys at Club Capital. All information is general information, informational purposes only, from what we have found through our research. Each individual circumstance and situations is definitely unique when it comes from— to a tax perspective and your agency's financials. So important to speak with either attorney or your CPA, which tends to be us in many situations, but individually to discuss any claims, questions, concerns that you have related specifically to your business. Business. Okay, so we will address a lot of questions, a lot of it will apply to you, just know that it is good to have those one-on-one conversations to make sure that we discuss your specific environment too. For some reason, this keeps going back on me here. So what is the Employee Retention Tax Credit? So this is a program that actually came out of the CARES Act in 2020. So if people on the line have been with us long enough, we've done a ton of initial CARES Act webinars, specifically around PPP, some around EIDL, the Economic Injury Disaster Loan. This originally was a part of that, and it was a part of the government's plan to help stimulate the economy, help businesses keep employees on payroll. As we know, especially a lot of our clients and most small businesses around the country took advantage of the Payroll Protection Program loan that was available to them to help their business. And so at the time, in kind of back in 2020, you could not apply for the Employee Retention Tax Credit as well as the PPP. And so the PPP was, was much more of a robust program. And so everybody did that. So Employee Retention Tax Credit was really something that didn't get looked at too much. So it kind of came with a lot of rules around it that ruled most clients out. Unlike the PPP and EIDL, the Employee Retention Tax Credit, it's not a loan, it doesn't need to be repaid. And so in, from that realm, it doesn't need to be forgiven either. So the biggest thing now is that they've kind of relaxed a lot of rules on a lot of new legislation that has come out that's made this applicable to more to more businesses across the country, which is really why we're here today. So it's really along the same lines of an economic stimulus. And so they've relaxed some rules around eligibility, the amount of credit you can claim per employee, especially in 2021, overall length of the program. They've kind of like PPP. They did a PPP round 2, same thing with the Employee Retention Tax Credit. It was specifically for 2020. Then they've brought it into the first 2 quarters of 2021, and now, depending on the type of business, you're eligible for Q3 and Q4 2021 as well. Biggest thing to really highlight today, and, and especially for a large percentage of clients that work with Club Capital, new businesses, new businesses are now eligible to receive funds as a part of the qualifier that's known as the Recovery startup business. So in essence, this is a type of business that what they're saying is you started in the pandemic. So if you started your business during the pandemic, you are going to now qualify. Previous to this, it had— you had to have already been in business before the pandemic started, which they're saying generally what they put around that is February 15, 2020. So you had to have already been in business. This was the same thing as PPP loans as well. Now for the Employee Retention Tax Credit, if you started your business or your agency after February 15th, 2020, you can be eligible for a portion or certain quarters of this, and we'll go into that today. But this is going to be something that's incredibly important for a lot of Club Capital clients because we do work with a lot of new agents that are, that are just starting the business. So what is it? And then how much are the tax credits? So let's go through this here. I know this is kind of a lot, but we'll, we'll go through it one by one. So it's based on qualified wages per employee. Okay, so qualified wages are wages, compensation, company health expenses paid by an employer to full-time employees, um, and a full-time employee is 30+ hours per week, uh, in a relevant quarter. Um, so a couple different qualifiers here in terms of business tenure, uh, as well. So for 2020, um, business tenure must have been in business, um, before, uh, February 16th, 2020. We'll just follow this line down here. The credit rate of employee salary paid, uh, is 50%. The max credit per employee is actually— I apologize— $5,000 per year. I'm going to, I'm going to edit this on the fly for everybody. I want to make sure we do not get anything wrong here. Uh, so for established businesses, if we look at kind of two qualifying years, um, so you can be applicable if you're an established business, you can be applicable in both 2020 as well as the first two quarters of 2021. But if we look only at 2020 for right now, uh, it's a $5,000 max credit per employee per year. Okay, so the example here, kind of 5 employees as long as you're paying up to $10,000 in qualified wages for that, for that year, you have an ERC credit of $5,000 per employee. So in an example of 5 employees for the year, you're looking at a max of about $25,000 for, for all of 2020. What they've done in recent legislation is they've extended this into 2021, and they've upped the amount of credit that you can have per employee, not only have they upped it to $7,000 per employee, but it's $7,000 per quarter per employee. Okay, so the Q1 and Q2 qualifier for 2021 have to have been in business before February 16th, 2020. And $7,000 per quarter per employee. In this example here, 5 employees need to be making about $40,000 a year is at least the threshold, minimum threshold to reach that max. For your employees. So it'd be $10,000 in qualified wages. The ERC credit is, is 70% of that, or the $7,000. So $7,000 per employee, which would equal $35,000 per quarter. And for 2021, there's only 2 eligible quarters for this for, for businesses that were in business before February 16th, 2020. So the possible total ERC for established businesses is $70,000 here. Now keep in mind, we're going to go into the eligibility requirements into this later, but this is kind of talking about what is the credits, what are they, how much is it, um, really to be able to determine, hey, is this something I need to be cognizant of? Is this something that, that I should really pay attention to? Answer is yes. There's a lot of money on the table here. Uh, the last one here, 2021 Q3 and Q4, these are only applicable to what is referred to as recovery startup businesses. So Q3 and Q4 2021 are only applicable to businesses that started after February 15th, 2020. And so the qualifying range here of, of like what the parameters are per employee are pretty much the exact same as those established businesses for Q1 and Q2, but it now applies to recovery startup businesses. So recovery startup businesses now have the ability to get that same credit which if we use this example would be upwards of $7,000, so a max of $7,000 per employee per quarter. There is a max total of $50,000 per quarter or $100,000 total. In this example, if we had 5 employees that were eligible for this, the total ERC for the agency across 2 quarters would be $70,000. So I think with putting the numbers on the table, we're showing this is a huge opportunity, uh, possibly for, um, for all of our agents here. Um, some quick restrictions on, on wages that they have. Um, you cannot include wages, uh, paid with PPP or EIDL. So you can still apply. One of the things that they did is they took the requirement out that, uh, or the stipulation out that you can't have ERC if you did PPP. They've taken that out. But they've said, okay, if you covered funds, whatever the wages were that you covered funds for on the PPP side, so which were really only like a 2.5-month period if you remember the qualifying range there, uh, you cannot in essence double dip on that. If you already got those paid by the PPP loan, then you can't use those to qualify those for ERC as well. Okay, so, uh, That's the only stipulation around PPP. You cannot include wages paid to employees that own more than 50% of the business. So this would also include the agency owner, right? So a lot of S corporations, if you are on payroll, you would not be a part of those qualified wages for the time period. It would be just your employees. Another stipulation is that it cannot be paid to employees related to the owner. So if you have your wife on payroll And I believe even if it's tangentially related, right, so you've got your brother, your sister on payroll, we'd have to look into that a little bit more. But any employees related to the owner of the business cannot be included. And I know this applies to a lot of people have children on payroll for tax-related purposes. It wouldn't apply there either. You cannot include wages that have already been claimed by any other tax credit. So we mentioned the PPP. But if there's things such as emergency sick leave, right, so if somebody has been out of the office due to COVID, you're allowed to use the emergency sick leave. So a lot of our clients, a lot of our clients use, use Gusto or use ADP. You can elect to pay them through emergency paid sick leave, which the government in essence ends up reimbursing you for those hours. So if they're already reimbursing you, you can't use those in the qualification here. So those are just some quick stipulations there. So now eligibility, right? We've gone over what it is, how we kind of calculate a bit of it. Is my agency eligible for the Employee Retention Tax Credit? So it really differs based on whether you're an established business or new business, and we're going to go through both of those. So established businesses are those that, for purposes of this conversation here, started your business or your agency start date is before February 1st. February 15, 2020, so in the eyes of the government, you started— you're already in business before the pandemic started. Or are you a new business and you started your agency after February 15, 2020, or after the pandemic started? So we'll first— we'll first start on the established businesses here. So there's two key factors that determine eligibility for established businesses. So one is a full or partial disclosure— uh, disclosure— a full or partial closure of your business due to a government order. So I'll go through this, but quick, just aside here, our stance from Club Capital is that insurance agencies will not qualify under this particular factor. Now it is an either/or, but it's our stance that I don't believe insurance agencies will qualify too much for this. I'm down to to likely debate that with some of you if you want to talk about it at the end of the presentation, but I don't think we're going to qualify here. So what this is, is that your business was forced to fully or partially suspend operations or reduce business hours because of a government COVID-19 order. Now, I think we could all agree every business was, was forced to partially suspend operations. Here, large caveat though, is that according to the IRS, there's some certain businesses that are generally that don't meet this criteria. It's those that are considered essential businesses, which I believe, and I think this is state-specific, but I believe insurance agencies were deemed essential in most states. There's some, I think, banking and everything that is involved within the agencies. As well as businesses that were shuttered but able to continue their operations largely as normal through telework. So I think it'd be a hard case to use the first criteria here for a lot of agencies. Again, able to have conversation on that later, but that's the first one. The second one, and again, either/or, is a significant decline in gross receipts. Uh, so I definitely think, um, that this is an area that, that could apply to some agents. Luckily, insurance agents, uh, in insurance agencies across the country that, that we work with did not see a drastic decline, um, due to the pandemic. A lot of, uh, people have certainly had really good, uh, performance. Granted, rates decreased, so that could hurt, uh, obviously at the same time, but not typically did we see large decreases, um, uh, in terms of, uh, 20-50% decline in revenue, which thankfully— but it just might mean that it doesn't qualify us for the ERC. So, uh, tax year 2020, so two different types of, uh, ways that we can qualify this. If we only look at tax year 2020, then we need to have, um, so the rules around 2020 for ERC is that the business must have seen a 50% drop in gross receipts when comparing a quarter in 2020 with the same quarter in 2019. Okay, now it changes for 2021. They make it much more lenient in 2021. So businesses must have seen a 20% drop in gross receipts in Q1 and Q2 of 2021 compared with the quarter in 2019. So pre-pandemic, right, the, the year that they're trying to use as a base year. Of the year before the pandemic. So only a 20% drop versus that. Okay, so for— and again, I'm not talking about recovery startups here, this is the established businesses. Where we'll really want to look, especially where everyone would want to really pay attention to in terms of a drop in receipts, is likely the month that you receive— or excuse me, the quarter that you would receive annual bonuses. This is the quarter that we would likely see the biggest difference. So if in 2019 or in 2020, you know, you had a different, you know, comparatively to today, you had a much less scorecard bonus or annual bonus as comparison to 2019. That is something that could drastically reduce your revenue by, say, 20% for 2021 or for 2020, maybe 50%, depending on how large a scorecard bonus was or an annual bonus laws in 2019. Okay, so those are the areas to look at specifically for Club Capital clients, which most are on the call today. Um, uh, log into the reporting platform. Uh, you can obviously, uh, reach out or talk to your account manager about this, but you can log into the reporting platform. You should be able to go directly to that quarter, so that'd be Q1, uh, for all our clients, and you can compare it to the previous year. And you can, depending on how long you've been using Club Capital, but you can compare to the previous year. So like Q1 2021 to Q1 2020, you would then be able to go back to Q1 2019, not in that same report. But if you have any questions, reach out to your account manager, reach out to support@club.capital. We can help you do that. Obviously, we can, you know, if you think it applies to you, we can help look at it too. Now, this is specific to established businesses. We're going to now talk about recovery startup, and I will say we have time for questions at the end, so I can definitely come back to this. All right, so recovery startup businesses, you're going to see that it is only a couple of lines here. So defined by the, by the IRS as a business that began operations on or after February 15, 2020. And has average annual gross receipts that do not exceed $1 million. So generally speaking, for, for all of our clients that— or agents in general that are not our clients that started after February 15th, 2020, you're nearly a shoo-in as being eligible for this. This right here is what we see as the biggest opportunity for insurance agents right now is those that started their business after February 15th. So as long as you meet these two requirements, which, which any business that started after should, it's a shoo-in. So you do not have to show the other criteria. You do not have to show a drop in revenue. You do not have to show that you were partially shut down. So this is two really big things that for, for brand new agents. So I'll go into applying for the ERC. What does it take if I, if I'm eligible? If I think I'm eligible, what do I do here? Shocking, honestly, there's no official application. So it's more really how do I claim it. So it's not how do I apply for it, but how do I claim it. And so claiming the ERC will happen really with an amended 941 an amended Form 941, which is a form called— it's an IRS form called 941-X. So if you don't know the Form 941, it's a payroll form with the IRS. So this is filed by your payroll provider on a quarterly basis showing the total number of employees paid, gross compensation, taxes, etc. And so a Form 941-X, so it's an amended form to say we're going to actually reduce the amount of— we're going to show that we actually paid less, right? So you kind of have to do the math on your end, right, to say, okay, based upon the criteria outlined with ERC, I'm going to actually show how, how much wages should have been reported instead of the wages that were reported on the 941. And, and so what will happen is that this credit will serve as like an overpayment and be refunded to you by the IRS after subtracting kind of those share of the taxes. So in essence, the government is paying from this, from, from the Social Security, the Medicare, etc., and they are then taking that money out from, from those reserves and paying for this. Okay. So that's where this is happening. And so we have to do a 941X to do this. So any reimbursements from taxes withheld will be sent to the businesses that fulfills the ERC. ERC or ERTC. And so in essence, what's happening here is you're, you're filing an amendment saying, you know, no, I shouldn't have paid as, as much into the government. So they're going to refund you. Well, for the IRS to process that, stated on the IRS website, as of now they're saying this takes at least 16 weeks to be able to submit this reimbursement back out. Okay. And we have to remember that if we're doing amendments to quarters, it means that the original had to have already been submitted. So if we're trying to do a claim, this, say, for a recovery startup in Q3, well, Q3 just ended. The 941 for Q3 is— so most of our clients got our ADP, the 941 isn't even filed yet. So we need to wait for that 941 to be filed to then amend the 941 and send it in. Does it sound a little convoluted? It probably is, but it's a government program, so that's what we're here to do. So considerations here, um, an amended 941-X will have to be filed for each eligible quarter. It's not just one application we send it in. Total qualifying wages will have to be calculated per employee per quarter. We talked about the wages for owners, One big thing to think about here too, and this gets into kind of a frequently asked question of, hey, am I going to be taxed on the ERTC? So the, uh, the credit here is going to impact your financial statements because in essence you're getting a refund back for wages paid. So you did not pay those wages anymore, so then your profit in essence will go up, right? It's, it's, uh, no longer a deductible expense because, because you got reimbursed for it. So this is definitely going to impact your financial statements. Obviously, in turn, if it's impacting your financial statements, it's going to impact your 1120-S if you're an S corp or a Schedule C for, for sole proprietors or LLCs filing on a Schedule C. So we see that this, this is going to have an impact on maybe timing of end-of-year financials. It's also going to have an impact timing on getting tax returns filed next year, likely because we need to make sure that we have the funds back, that we're accounting for it appropriately to say, yes, we received these funds back. We need to reduce the overall expenses for the agency. And then, so in turn, is it taxed? Is the ERC itself taxed? No. But it's— you now don't have those as deductible expenses. So the profit of your agency is likely to go up by the same amount. So income taxes based upon the increased profit, will increase. We do expect some percent of the ERC recipients to be randomly audited to show proof of eligibility. So certainly something to keep in mind. Repayment and fines will be imposed on businesses that are found to have received the ERC that did not qualify. We couldn't find direct language as to what those fines look like, how they plan on auditing, but bottom line is, you know, let's look at the eligibility requirements let's determine whether or not the business does qualify based upon those eligibility requirements. And we need to feel secure about putting in amended 941s based upon this criteria so that you're not going to be at risk or at risk of an audit or especially fines. I know there has been a lot of what they're calling PPP fraud, and they are cracking down pretty hard on people that are trying to to take advantage of some of these programs when they know that they don't fully qualify. So how can Club Capital help here? A couple of things. We did our research on this. We were getting a lot of input. There was a lot of questions, especially for most of our clients, probably 98% of our clients utilize Gusto. And there's some things on Gusto within the platform that are saying, hey, check here, click here if you, uh, if you qualify. Um, they were working, um, with a group called Clarus, um, to, to help here. The first thing we wanted to do is, is we actually looked at partnering with a, uh, a couple of firms, um, to be able to bring, uh, top-notch expertise around this, uh, to our clients. Um, and so we've been in conversations with a couple groups for, uh, uh, for, for a while now. Um, and really what we found is that there's a lot of firms out there that are one, hyper-focusing on this, change their entire business over to ERCs because they see the potential. And there's some businesses that are just spawning up out of nowhere that are only focusing on Employee Retention Credits based upon what they're kind of the business model and pricing model that they're setting up for agents. So there's a couple that we looked at. I mean, we wanted to be able to find somebody that could quickly kind of address this and maybe our clients could partner with. On something that's kind of a specialty tax item like this. What we found is that groups are honestly just— they're really price gouging small business owners is what we feel. Klaris, that works— they're partnered with Gusto, so we figured that was going to be the best option for everybody. They're charging a total of 10% of whatever the ERC value is that the clients qualify for, and they need that value upfront. Kind of regardless of, you know, when you get paid. And then Alliant Group, one of the largest specialty tax firms in the nation, charging a total of 25% of the ERC value once— and they're doing it once you receive the funds, so a little bit less risk on your side. Bottom line is it's a lot of money. It really, to us, had no direct correlation to the amount of work that the firms were doing. It was really kind of price gouging based upon the, the opportunity that's in front of them. So what we've decided to do, um, and why this is taking a couple, uh, extra weeks or months longer than, um, than we would have wanted to be able to get some figures out, is, you know, we're going to take this on ourselves. So, you know, depending on, on how many people, um, you know, we can help or would like for us to help them, um, you know, it's a pretty significant investment in time and resources on our end, um, to be able to get this. But we want to set up a pricing model that really is based on the work done and hedges a little bit against future audits and what we know are going to be, which are— everybody knows that the bane of our existence is those state tax letters or the IRS tax notification letters. We know by getting into this and having to do amendments on, on IRS forms, You know, the left hand is never going to be talking to the right on the government side. So there's going to be a ton of back and forth correspondence down the road. So that's how we're going to try and help here. So we're setting up ourselves to be able to do some employee retention tax credit advisory services. Certainly out of the gate, any sort of eligibility consulting is, you know, just, just part of being a Club Capital member. So you can talk to me, to Chris, generally to anybody at the Club Capital team. We have been doing a lot of education around this, and we can help you determine eligibility. For established agents, so the agency start date prior to 2/15/20, it is possible that we might be able to utilize the payroll platform. I think primarily Gusto, possibly ADP. We might be able to do some things directly within there. That will not require, uh, kind of called capital man-hours to, to be able to claim, um, the ERC. Um, but for— however, on the recovery startup businesses, so this is agencies that started after, uh, February 15, 2020, none of the payroll platforms, uh, are, are kind of making this easy on, on their end to apply. Um, and so we're going to need to do amendments for the 941s for, for any eligible applicable quarter for recovery startup businesses. And so what we're going to do is we're going to do it based upon the work that we have in front of us. So we're going to be charging based upon the quarter that needs to be amended, so $1,200 per eligible quarter, but with a max of 20% of total ERTC. And this really only applies to maybe a if we have a brand new agent that started in the middle of a quarter. When we looked at this, at this and pricing, fees are intended to be no more than probably if it's $1,200 per quarter, it's not going to be more than 6% of the total ERC value given at least 6 employees that qualify. So 6 employees qualify at 100%, that's $21,000 a quarter versus the $1,200 cost for us to be able to kind of manage this. So we'll determine eligibility, collect documentation for the ERTC-eligible employees, calculate the document— calculate and document the credit for your records, prepare the 941s and file them with the IRS, which have to be done manually via paper, make the necessary adjustments to your agency financials as soon as we receive confirmation from the IRS. Because this is going to affect end-of-year income tax preparation, likely with us or your own CPA. We'll field and respond to all 941 filing notices received by the IRS and provide audit protection services against us. So if you end up getting audited related to the ERC, you know, that's, you know, that's on us and we'll cover you on that end. So just some reminders. We have no influence over the timing of the credits. IRS doesn't care who we are besides the fact that, you know, we can get power of attorney for you all and talk on your behalf. And then what we are doing in terms of the fees is we are going to do it upfront just based upon— it's the time it takes for us to be able to do this, but we can put it on like a payment plan too. So as long as we can provide and determine if this is— if you are eligible for this, then we have, you know, a guarantee then of you being able to receive that money. We just don't know the timing of what that'll be. So some quick FAQs, um, and then we'll get into, uh, some direct questions. I see there's quite a bit of— it looks like chat into, um, uh, into the chat box in Zoom. Um, there is kind of a helpful summary table here. I'll just kind of leave it up, uh, on the screen, um, that I put together. Um, the one quick thing, um, is the ERC taxable? I covered this a little bit, but yes and no. The actual credit itself is not, or the ERC is a refund of taxes paid and in essence a reimbursement of salaries paid to employees. So it's going to in essence increase your profit, which— so it's hard to say how much it'll be taxed because it's based upon income taxes, which is a little bit different than PPP, right? They ruled that that was kind of not taxable at all, not a taxable event. Did not need to kind of qualify that as one. So this is different than that. So I'm a recovery startup, can we go ahead and file this? Bottom line is we're not behind on this. And nor is anybody really, we can still go back and do anything from 2020 or 2021, even for established businesses. But for recovery startups too, this has— it's not even an option to try and claim this yet, because your 941 original 941 for Q3 2021 has to be filed, and it's likely not filed. So again, this is filed by your payroll provider, Gusto or ADP. And so if as soon as Gusto files it, we can go ahead in and do an amendment on that. So that'll likely be towards the end of October. So normally third or fourth week of October is when Q3 will be filed. And then the same for Q4, right, they won't be filing that 941 until January, at the end of January sometime. All right. I'm going to open it up to questions now. I'm going to open the chat box. Chris, you've probably been looking through here. Uh, anything that stands out? Yep.

We definitely have some really good questions. Um, the first one is, I wasn't in business in 2019. I opened my agency on November 2019. So of course, every quarter of 2020 is going to quote unquote beat every quarter of 2019. Is there any other way to prove a decline in revenue?

Yeah, no, great question. So for this, um, if you started your agency at some point in 2019, um, you can use, let's say for that example, Q4, uh, 2019, you can use that as your qualifying quarter. So if Q4, if any quarter in Q1, uh, or excuse me, any quarter in 2020, uh, or 2021, you're actually comparing to only that one quarter in 2019. So you don't have to look at Q1 when you weren't in business, right? You're only using that one, uh, quarter in, in 2019.

So essentially, if they only had one month of revenue in 20— in Q4 2019, Of course, when they have 3 months of revenue in Q4 of 2020, most likely they are, they are not going to qualify for the ERC, correct?

Off of what I'm understanding right now, yes. Yeah. If I'm thinking about it correctly right now, I think the income is, is not going to be the qualifier for them. Yep. Because likely if you're just starting your agency, then, you know, you know, Also, luckily, right, uh, you are likely going nothing but up in revenue, um, from the time that you started quarter over quarter. Um, and so you're likely not going to qualify based upon that. Correct. All right.

Next question. Uh, it's a really good question as well. Um, so I had an old EIN from, from a previous agency. Um, and I started a new agency in June 1st, 2021 with that same old EIN. How does this play out for me?

Uh, it's a great question, uh, and going to need to be something that we will need to speak with you directly on. Um, so please, if we can just write down who that is and we can get back to them, uh, Chris. But it's a good question, um, because my understanding— I was actually going to address this for, um, multiple office agents So even if you're starting, say, you know, for on the Allstate side, if you bought a new book of business or if you, you know, start a MOA on the State Farm side, it's from my understanding, it's going to be the EIN that matters, right? You're not starting a new business that the business is going to be based upon the EIN. So in that specific instance, though, having an old business and then reutilizing it later for something different is maybe a way to, uh, there might be a way around that. But especially for my understanding, for multiple office agents, if you just started a new office location during this and are trying to maybe qualify that, uh, it's going to be— I don't think it's applicable, um, because it's still a part of technically the same business in the, in the eyes, uh, of the IRS.

That would be unless they got a new EIN for the new business, correct?

Correct. If there's a new EIN, yes.

Perfect. So I cannot show an income drop for gross receipts because I was paid out as if all of my clients were making their payments in a timely fashion. Is there a way that I can show, um, eligibility based on, based on premium that was paid as opposed to gross receipts that I received?

No, it's based on gross receipts. It's, it's, yeah, it's pretty clear in the eligibility requirements, gross receipts to the agency.

All right, thank you. I'm opening up on December 1st, 2021. Any chance that I'm going to be eligible for this?

You are eligible for Q4 of 2021 for that one month. So, you know, you would have to have— well, it's, it's 70% of qualifying wages up to a total of $10,000 per employee. So, you know, if you end up paying somebody for a month, you know, and their salary is, is $3,000, right, for that month, then you would receive 70% of that $3,000 as a credit. So yes, you would be, um, you'd still— bottom line is yes, um, you just likely will not hit the max value per employee because it's per employee per quarter. Um, but, uh, it's also a way to, to possibly staff up in a sense to receive more of a credit back. But you'd need to do the, the math and the ROI on whether that makes sense.

All right, we have an admin question right now, and then we have some really good questions coming up. Um, is there a difference in the amount that I pay to Club Capital, uh, if I hire you, between me paying it up front and me doing a payment plan?

No, no, no. We just want to make it as easy as it can be for you.

All right. If I— if I incorporated during the pandemic but opened up as a sole proprietor in November of 2019, Do I still qualify as if I opened up before the pandemic?

So essentially, that's a really good question. It's a new, it's a new EIN, but it's not technically a new business. Um, this is a really good question though, because it's a technicality. So, uh, if that applies to anybody here, anybody here you incorporated during the pandemic, please definitely write into us about this. We'll definitely track that on our side because we'll get an answer to that and we'll get back to you. But that's a really good question.

Yeah, I would, once again, I would encourage what— pretty much like second what Micah just said because that's a really good question actually. Um, so I open on January 1st, 2021, and have not filed taxes yet. Will I need to file an amendment after I file my taxes next year, or can I include that in my taxes this year when I submit them initially? I think, uh, there might be a confusion between income taxes and payroll taxes, uh, in this question. So I would say it would be good to break this, break this down.

Can you just repeat the question?

Where is it? Yep.

Yep.

So I opened up my agency on January 1st, 2021, and have not filed taxes yet. Will I need to file an amendment after I file my taxes next year, or can I include it in my taxes when I submit them initially?

I think we're, we're not sure. I think as we need to, the process is we are going to file an amended 941X, um, showing the amount of credit that should come back to you. I would not want to file your taxes until we receive that credit. So I mean, we would in essence have to— I mean, what you could do is file, but then once you receive that credit, you would need to amend that because you would owe more taxes based upon it. So I would want to make sure that we receive that amount by— from the IRS for the tax credit for the applicable quarter. And we would need to apply that credit to that quarter specifically. Right. So it's not like saying, okay, if I got $21,000 credit, I can just add that in as like revenue or something towards, you know, a 2021. We need to apply it to the quarter that you applied— that you like claimed it on. Does that make— does that help? That makes sense.

Yeah, yeah. Um, so two— so two more questions. I only have one full-time employee. At the quarterly rate that you discussed of $1,200, it would be more than 10% of the ERC for me. Are you willing to scale down to help agents in the same scenario?

Yeah, 100%. Um, and sorry if it wasn't clear, but Where is it? A max of 20% of the total ERC. We want to make sure that we don't, you know, for people in this situation, we don't— we're not trying to put you in a bad spot by any means. So what we have is a max of 20%. If this happens to be more than 20%, ultimately we're trying to be incredibly reasonable based on the time and effort on our end. But yeah, don't want to go over a certain amount. So if you're in a, in a different situation, we're definitely able to work with you on that.

All right, and then last question, also an admin question. As far as the fees go, are you paying them separately for each quarter? So if we apply for Q3, we pay roughly $1,200 And then again when we apply for Q4, uh, so essentially Q3 $1,200 and Q3 $1,200 and Q4, or is it understood that we are applying for both quarters in the upfront, um, and the fee is paid up front or spread over the 3 months, uh, essentially due of the first filing and then the 3 months after the second filing? Hopefully this makes sense.

Yeah, no, it, uh, um, it does. Yeah, and good question. Since we do have to space it out Right. So like we'll be doing some of the work now and then we're going to have to wait until we do the other work. It's up to you, right? It's up to you what you'd want to do there. We can do it up front or we can do it. We can do some of it now, some of it later, depending on your financial situation. I mean, my just the business side of me and tax side of me says it's a way to increase and bring expenses into this year, right, to reduce total tax liability for this year, to have all of those expenses paid in 2021. But again, from a cash perspective on your end, up to you. We can do one payment now and then one payment next year. But just keep in mind, it might be good to keep all that in to reduce taxable income for this year.

And the question that I have next is it's somewhat related to this. Essentially, for the expenses of working with you on the eligible quarter, does that expense count as income for the business owner or does it count towards agency expenses? So essentially saying, are our, our fees like a write-off essentially?

Yeah. Anytime you work with Club Capital, it's a, it's a business write-off. Yeah. Anything, monthly fees, taxes, this, uh, any, it's a business, business expense. Yep. Yeah.

So, so like pretty much like repeating what Micah just said, like if you will, if you do pay your fees, uh, entirely, uh, this year, then it's going to increase the amount of money that you can write off this year, which is going to decrease your tax liability.

Correct. Yep.

So something to think about.

All right. Any other questions?

Looks like that's it. Looks like that's it for the questions. Thank you everybody so much for attending, and please reach out to us if any questions do come.

Absolutely, yeah, support@club.capital, reach out to your account manager. They've been brought up to speed with all of this. If they don't know anything right away, they'll bring it back to us and we'll get back to you. But we will be following up very heavily with clients over the coming months to see how we can help to go ahead and claim this for as many businesses that qualify. Thank you, everybody. Have a good rest of your day.

Thank you. Take care. Bye-bye.