Episode 155: Fireside Chat - Is My Agency Eligible for ERTC? with Micah Cannon

So the big question is this: how do small business owners like us grow our leadership, develop our teams, and scale our business in a way that allows us to get our products and services out to the world yet still remain profitable? That is the question, and this podcast will give you the answers. I'm Bradley Hamner, and this is the Club Capital Leadership Podcast. Hey, before we get into today's episode, did you know that Club Capital is the largest accounting advisory firm for insurance agency owners in the country, providing monthly accounting, CFO services, and tax preparation. Check them out at club.capital.

Welcome to another episode of the Club Capital Leadership Podcast. My name is Bradley Hamner, your host. On today's episode, we bring back Micah Cannon, COO of Club Capital, and we talk about this tax credit that many of you may have been wondering about, heard about. And so we're specifically going to help you to be able to answer the question: is my agency, or are you eligible for ERTC? What is it? How did it come about? And Micah does a really great job talking around 4 different main things that can potentially help you to be able to qualify. And I think that whether you're— if you're a Club Capital client, obviously reach out to your account manager to talk to them if you haven't already. And then number 2, if you're not a Club Capital client, you're going to want to reach out to somebody on the team. And talk to them after you hear from Micah. I learned a lot and I felt like I have a pretty good understanding of this, but he does a really great job around walking through the 4 main things that's important for you to consider as a small business owner about whether or not it makes sense for you to be able to file for ERTC credits. All right, without further ado, here's my conversation with Micah Camden.

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Micah Cannon, welcome back to the Club Capital Leadership Podcast.

Thank you for having me, uh, yet again, Bradley. I'm talking to you a lot recently.

You were so popular last week, I had to come— had you come back home? No, there's just a lot for us to, to be able to talk about. And, you know, these now Wednesday episodes really kind of started from you and I having conversations, and we thought we really need to put some of these conversations on the podcast. I think people would get something out of it. But it really actually is here to be able to serve our listening audience, to help them And so today we wanted to talk about something that's been, you know, pretty popular, a big topic of discussion. I know for you guys and the team at Club Capital, which is ERTC. Before we get into that and what that is and, you know, are you eligible, etc., and just answer some of the questions around that, I thought I would just give you an opportunity to just kind of talk about— man, it's been a— it's kind of been the Wild Wild West over the last couple of years. I mean, from March of 2020 and then everything that's kind of came out from COVID and all the support programs from the SBA. And you just kind of take back in your thoughts around just generally what you've seen over the last couple of years for the agency clients that Club Capital serves. And then we can get into specifically your ERTC.

Yeah. So the last couple of years, I mean, just like a lot of people will attest to, have just been very unpredictable when it comes to business. You know, I think obviously I, you know, just like everybody else kind of, you know, looks at their own business industry news, obviously, you know, I'm very much involved in some of our own industry news. And, you know, we are not the only firm, you know, accounting finance advisor and DAX firm that, you know, has been having just full, you know, totally fully upended the way in which we've been doing business over the past couple years. And, you know, I don't mean that to say, oh gosh, we weren't ready to go virtual, because that's definitely not how our firm was. But it's really just how much our business has changed, as well as how much small businesses have been impacted. Financially over the past couple of years. And with that, how much has that the government has kind of, you know, allowed, enabled, and enacted to be able to support and help them over the past couple of years. And so a combination of, you know, uncertainty and as well as all sorts of, you know, different government programs that are out there, generally people have been looking to accountants and tax advisors way more than they have in the foreseeable you know, passed. And it has definitely changed the way in which Club Capital has delivered its services, designed some of our services and our tax packages. Because bottom line, we're doing services now that we've— one, we have never done, nor has the entire rest of the country. Right. So there's been a lot over the past couple of years you know, for us to learn. And which I think is sometimes good to remind all of our clients and prospective clients is that, you know, Club Capital, as well as any other firm you talk to about, you know, some of these, these credits or programs or all sorts of things, if anybody is calling themselves an expert on this, you should take that with a little bit of grain of salt, right? This is all new over the past 2 years, right? So you didn't study this, you know, in college for, for a number of years from a textbook that was written, you know, 30 years ago, right? This is all brand new. Um, and so I think everybody's doing the best they can to, to really be able to put their best foot forward, um, and try and help as many businesses as they can. And that's certainly the way in which, you know, we at Club Capital have approached, you know, everything that's been new over the past couple of years.

Yeah, I think it just makes me think about, you know, I've had some involvement in the medical field and you talk about physicians practicing medicine. I mean, my goodness, there's a lot of this that's kind of practicing business and practicing taxes in the constant ever-evolving landscape and environment, which is, which is tax. And in the midst of all of that, you not only had COVID, but you had a, you had a presidential change, which obviously changed the way that they started to view taxes and philosophies around that. So there's just a lot. It's another reason why we decided to start doing these Wednesday episodes is because as things continue to change, we want to be able to get that out to the listening audiences as quick as possible so that we can answer some of these questions to people that they may have, because people don't know and they're trying to navigate it the best that they can. And so I think that these, uh, different Wednesday episodes that we have coming out are going to be really helpful to be able to provide more value to people. So what was— where did— and what was the intent originally of the most recent one with the ERTC? What, what's the intent behind it and kind of give us the high level of that first, and then we can kind of start getting into eligibility requirements, etc., for somebody to be able to say, hey, am I, am I actually eligible for this that's out there?

Sure. So yes, the ERTC, just, you know, for everybody to know, that's the Employee Retention Tax Credit. And so this was something that was— it's not brand new. Originally was a part of the CARES Act, which first came out in March of 2020. So it was originally what came out with, with the Payroll Protection Program, which generally everybody knows about now. And certainly, you know, most small business owners, you know, were able to utilize. But the Employee Retention Tax Credit came out then. So it's not brand new, but I think there's been this renewed you know, interest in it over the past, certainly over the past 2 months, but really over the past probably 6 to 8 months of saying, wait, is this something that my business is eligible for? And so the Employee Retention Tax Credit, you know, very much, you know, in the spirit of, you know, what the CARES Act was for was to help small business owners be able to keep people on payroll. Right? I mean, what the government wanted was for people to keep working, right? And for small businesses, you know, they were in essence, and most businesses were saying, you know, hey, we might not be able to keep them on payroll, right? And so this was to be able to say, okay, well, we will help you keep them on payroll. And so initially, the way in which, you know, and you got to remember a lot of, you know, tax regulation and everything, this is all this is all, you know, law, right? This is all legal documents, right? So the way in which this was written and then certainly, you know, put into force is that you could not be eligible for ERTC if you were eligible for PPP, the Payroll Protection Program, right? So generally, most small business owners, most of the clients, you know, that we work with were all eligible for that. So it made them not eligible. For ERC, right? So it was just, okay, well, this is something we don't need to worry about, right? And so for a lot of small business owners, that's what happened, right? Is, okay, we don't need to worry about it. And so why this is kind of coming back around is that, you know, they continue to make some changes to this law and to the eligibility criteria. And so they started to do that, I believe— gosh, 2022, I think late 2021 into early 2022. Starting to relax some of those eligibility requirements and saying, no way, if you did have PPP, you can be eligible for it. And so that primarily right there is the biggest reason why we've had just much more of an insurgence of people, you know, wanting to know a lot more about it, understand more about it. And we've been doing our best to try and get to our client base and, and others within the industry to say, hey, this is something you need to pay attention to.

Yeah, yeah, it makes— that makes a lot of sense. And to be, you know, whenever it starts to get out there, you know how it is when they— people grab a hold of it and they listen. You would certainly agree with this, that you want people, anybody that's eligible for money that's out there, man, you want to be able to go and get that as a small business owner. Business is hard enough. And so if you're able to— the government's going to give a program that you're actually eligible for, my goodness, take advantage of that, right? So They relaxed the PPP requirements. And so if you had that, now you can actually be potentially eligible for this. And so what are some of the basic things about— okay, well, for me to know whether or not my, my business, my agency would qualify.

Yeah. So there's a lot to the ERTC that would probably not be best for a podcast to get into the very specifics when it comes into exact dollar amounts, you know, per quarter, per team member, or things like that. Bottom line, it's a sizable amount of money for small businesses. It's based upon a per team member credit to, you know, back based upon what you have paid them. Obviously, there's a max that you can receive, but it is, it's definitely very impactful financially if your business qualifies for this. And so I think I'll leave it at that in terms of financials of it and then get into, you know, what makes you qualify, right? Because I think that's, that's the biggest thing to cover here. There are, you know, really a couple of different— there's really like 3 different areas to where a a business owner, specifically with, you know, with Club Capital agency owners, can qualify. And one of the first ways that really, that really, you know, nicked a lot of people from the get-go that really disqualified them off of one statute was, did your revenue decline in essence pre-pandemic to post-pandemic, to post the start of the pandemic? And so You know, something that you have to look at too, one of the main dates that the government uses for the pandemic and for financials and taxes is February 15th, 2020. And so thinking about that data is kind of pre versus post. And so did your revenue decline pre-pandemic to post-pandemic? They end up doing this by quarter, right? So compare a quarter pre-pandemic to the same quarter post-pandemic, right? So example, Q3 2019 to Q3 2020, did your revenue decline by 25% or more? Right. And so what they're trying to do here is say, hey, did you— if your business actually was financially impacted by the pandemic, you should receive some help to keep employees on payroll, right? And so specifically where, you know, we work in the insurance market. Luckily, I think the insurance market wasn't wildly hit financially by this. A lot of agents have been able to keep up revenue or grow revenue a little bit throughout the pandemic. And so immediately they were not able to qualify based upon this. And they also were not really shut down in ways comparison to like a restaurant was, right? So another caveat was, was your business fully shut down, you know, or told to, you know, like, to that, that you could not come into the office, things like that. And so yes, you were able to not come into the office, but were you still operating? Was everyone working from home? Yes, right? So it's been really hard to kind of take that angle, right? Because it's not like a restaurant where you were shuttered. You know, everyone went from home. Now, did that impact productivity? Yeah, likely, right? I mean, we all, we can all say that, but I think it's hard to make that case when everybody was still working, right? Or else generally every single business in the entire country can, can qualify for this, right? So if they're putting it as a qualifying metric, then you would have to say, well, no, I don't really qualify under this, right? Or else just keep it open. Right? Why have it as a qualifying metric? Yeah, right.

Yeah.

And so a lot of people initially did not qualify for this, um, until late, uh, until as of late. Um, so one of the things that came in that really agents really, really need to know about, um, especially for newer agents, is something called the Recovery Startup. So they came out with something that said, wait, if you started your business in the pandemic and in essence have no way of showing a decline in revenue right, from pre-pandemic, then you immediately qualify. We want to help new businesses, especially those that started in, you know, what is the, you know, hardest time to start a new business. We will just automatically help you. I mean, there's a couple qualifications that you have to be under $1 million in revenue, have less than 100 employees, but especially for most small businesses, that is them, especially if they just started, right? So you can almost immediately qualify. So if you are listening to this and have started your business after February 15th, 2020, you should contact us about helping you with ERC. It's called the Recovery Startup. We've seen so many clients, you know, a lot, a lot of, you know, not every CPA and tax firm is created equal. You know, what we have done at Club Capital is hyperfocus into our specific niche and kind of what impacts them. Um, and so with, you know, one specific niche, it's easy for us to be just incredibly good at that market where a lot of other firms are, you know, they can have clients all across the board in 100 different industries, you know, 20 different, you know, business sizes and things like that. And so it's hard to always, you know, be very honed into each individual's needs. I say that only because, you know, we've had a lot of people working with other firms that you know, just didn't know about this. They know about the ERTC, but they didn't know about the Recovery Startup part, right? So work with us or bring it up to them, ask them about it, you know, and if they don't know, reach out to us, right? You need to know about this because if you don't, if you do not submit and apply for this by the end of this year, you're likely not going to be able to receive it, right? So you need to know about this. It's really just a shoo-in. Right? And especially for those that are just starting out, anybody could use, you know, $10,000, $20,000, $30,000, $40,000 in additional, you know, funds to be able to help reinvest into the business. So definitely recovery startup is a big one. We have helped hundreds of brand new agencies with this over the past year, I guess, that we've been applying for this. So that is the biggest one. They've really taken out the qualifying metrics for those that just started, right? They just said, hey, you started your business, during the pandemic, we'll help you out.

Yeah.

Okay. So that's the biggest one. And then the next one that we're seeing definitely a lot more questions and interest on is due to a recent kind of change in some of the eligibility requirements where, you know, everybody is, is familiar with the term supply chain disruption at this point. It is, you know, every business is go-to for anything that's wrong right now, right? Oh, sorry, you didn't get your muffin in time. It was a supply chain issue. Because of all the supply chain disruption, and it, you know, specifically, I think one of the biggest ones, you know, just globally as well as that impacts our market is the auto industry due to supply chain due to chip shortage, etc., is that they've actually put a supply chain kind of clause into the legislation that if your business was impacted by the supply chain, you know, you can qualify for the Employee Retention Tax Credit. And, you know, I'm obviously not reading the entire legislation here, but the legislation is generally vague around this, and the tax code that they put out for this is, is very vague. Um, and so really our firm has been reacting to a lot of questions, uh, from current clients, um, that are being approached by a lot of firms asking them and telling them that they qualify for this. Um, and so it's good to note that, I mean, there are just a ton a ton of companies that are spawning up because of the Employee Retention Tax Credit, because it is a sizable opportunity. There are a ton of people, a ton of businesses that qualify for this that don't know about it, right? And so if that's the case, it's a, it's a, you know, good idea to, you know, to be able to go after that and help them, right? That being said, I think, you know, there's a good way to go about it. And there's also, I think, a way to take advantage of a lot of business owners that don't know about it. You know, when we— just a little bit of backstory here— when we called Capital, you know, found out about ERC and recovery startup and everything, you know, our first thought was, how do we help? We already know you know, in our CRM that we have a couple hundred clients that we could help with this that need to apply for this. And so we said, okay, you know, we either need to go get some help, right? Or we need to do this ourselves. And if we did it ourselves, we got to hire a lot of people. It's a lot of work to do, right? One, we got to figure out how do we do all of this? Two, we got to have the people to do it. And so initially we thought, okay, well, why don't we just partner with another firm that, you know, is kind of claiming to be an expert on this already to have them come in and help us do this. And so we talked to a good number of firms and they all had an interesting just model around it where they wanted to take 20 to 30% of the eligible credit that a business was going to get. As their fees. And, you know, they were saying, okay, well, we'll, you know, give you a discount, or we'll give you rev share. You know, our thought from the beginning was, this just doesn't seem right. This doesn't— this seems like you're— I mean, it seems like a great revenue opportunity, but it doesn't seem like it's priced based upon the, you know, the work that has to be there. And, you know, look, we're all in business, we understand profit margins and value and everything too. But I think you can do that without just flat out, you know, kind of exploiting, you know, the business owner on this, you know, doing a— doing what's necessary to help a business owner get $20,000, you know, is a lot of times the same amount of work that helps a business owner get $100,000. right? So should you be making that much more for your services for that? And so we just didn't think that was right. And so we ended up deciding to, you know, at the end of the day, you know, these firms are, you know, hopefully just helping clients or they're getting money that they didn't have, right? You know, which is a positive, but we wanted to approach it differently. And since we know our market, we know what goes into it, and we know the types of businesses that they are and the sizes that they are, we said, look, we can do a fixed price on this. And we can just— the way in which you have to apply for this, you have to do it per quarter that you're eligible. So in essence, we just charge per quarter, you know, whether you're in $10,000 or $50,000 or, you know, whatever that is, we just charge per quarter. Doing it. But I give this backstory because there's just a ton of firms out there that are, you know, really trying to, you know, rake it in while there's opportunity. Obviously, ERTC is going to be gone, you know, before we know it. But, you know, there's a— there's an ERTC.com, you know, in terms of a— or ERTCspecialist.com, you know, that are out there and people that are, you know, really, you know, I think taking advantage of this right now. And so there's a lot of people that are being just targeted by companies saying we will apply for this credit on your behalf. And so then they're coming to us and some of them are coming to us for, for a second opinion. And so really where, where a lot of people are getting contacted right now is around supply chain. Is this, you know, they're being told this is definitely something that they are eligible for. It's written right in the law. And it is. And I think it's definitely an opportunity. You got to know— you got to know the background, though. And you got to know that there is some risk to that. You know, very unlike recovery startup and did your revenue decline or not? You know, I think, you know, was your business impacted by supply chain is much more of a gray area. Yeah, right. And so you can by all means make the case and we're helping people apply for this, you know, that think they, that they can. Right. But it's definitely a gray area. And so what we mean by that is, you know, we're happy to kind of help process because we know how to file for credits for those. And it's not something that we blatantly think is, is, is not eligible.

We just—

it's enough of a gray area that we say, look, upon additional review, you know, by, by, you know, the IRS, it's possible they might say, you know, these types of businesses are not right. This was initially meant for this type of business, not this type of business. And so we are starting to see that. Quite a bit right now.

Yeah, I would say, you know, the conversation you and I had last week, you were— we were talking about CFO services and you said, hey, look, we're not making the decision for you guys, right? We're not saying don't go hire those two people or do hire those two people. We're just going to make sure that you've got all the information out there so that you can make an informed decision. It kind of seems like it feels the same way here to be able to say, look, this is how we're interpreting it. This is how we're reading it. Goes back to what one of the very first comments I made about we're practicing this too, right? I mean, practicing that we're trying to figure this out too, and we're trying to find every way to be able to get people. But understanding that if they come back and revise the legislation or make it more clear, then, you know, there could be some changes that you would need to be aware of. That's what I hear you say. You agree?

Yeah, absolutely. You know, I think, you know, from what I've heard from people that we've talked to to help think about this is I think we're being a little bit more transparent about, you know, what the— what's in the legislation and what, you know, what the rules are and what the rules aren't or what is a gray area. And being a little bit more cautious around this to say, hey, this seems like it's possible, but it's not like guaranteed. It's not like guaranteed.

It's not a slam dunk.

Yeah. So I think we can definitely help do the processing on this. And it's very likely that this is definitely within the spirit of the legislation and what they were wanting, but it's possible it's not. You know, who knows, that might, you know, they might ask for it back later, right? But, you know, until they, you know, put out some clear guidelines on it, you know, I mean, we're just, we're, that's kind of our stance, right? And to your point too, I think of, you know, like practicing medicine, the same thing with practicing law, right? This is very much kind of on the legal side too, very much so. This is how we interpret it, right? And there's no inter— you know, and the reason I say that too is there's no precedent right now. There's no precedent case out there that says, oh, you know, based upon this case, you cannot, right? So, um, you know, until there's something to say, you know, hey, this is the stance, um, you know, I think it's a gray area, and it's definitely something that, you know, is very possible, um, you know, that can help, you know, definitely in the insurance industry. If, you know, auto industry was impacted, which impacted auto sales, um, you know, for, for insurance auto sales and then insurance sales, um, It is very likely. I mean, that's the case, and it could impact the entire industry.

You know, I— this is Bradley saying this with zero information. Micah, if you want to chime in on this, feel free. But I mean, I don't know if it's true or not, but I've read things around X many thousand IRS agents being hired. Just leave that for what it is, right? And it's just something to be aware of. It doesn't— I don't know if that means that they're going to come in, start auditing everybody? I don't know. But I mean, there's at least something that I'm thinking about as a business owner. I'll just say it that way, right? Can I make sure that I've— am I willing to take the risk around certain things, whether it's ERTC or anything else for that matter? You know, I mean, there's people obviously that want to, want to be gas pedal down on aggressiveness, and then other people are just not comfortable with that. Anything else we're going to have? Obviously, in a few weeks I'm going to be talking with someone on your team about the value of tax planning. So we'll go much deeper into that in a few weeks on one of our upcoming episodes. We're going to talk about some other tax rules that are out there. We're going to do a webinar recast in a few weeks about, about a few. So we've definitely got a lot more value coming out on these Wednesday, but Before we close for today, anything else stand out around whether it's ERC or any other things that somebody, a business owner, needs to be thinking about possibly taking advantage of that may sunset by the end of this year?

I don't think anything that stands out, I think, too much by the end of this year. Nothing that's, that's fully going away. I think, you know, and Mariana from our tax team will go over this a little bit more on the tax planning side, probably. But there is something going away this year in terms of total percent of bonus depreciation for Section 179, which is vehicle depreciation. And so you won't be able to take the full 100% of the value of the vehicle this year, which isn't, isn't huge. I mean, it's definitely some, some definitely a change for a very popular depreciation tactic, but she can go over that more. I think when especially when it comes to credits or, you know, programs related to, related to the CARES Act or the pandemic, I definitely don't think there's too much outside of the ERTC. I think ERTC is definitely the big ticket item for most small business owners right now.

All right. So if they're a Club Capital client, they obviously should get in touch with their account manager, their dedicated account manager. If they're not, but they want to speak with someone on the team, where should they go?

Yeah, please reach out to us online. We have a contact form on our page as well as just schedule a demo on the top right-hand side of our web page, which is just www.club.capital. Know.com there and just book a time with one of our team members. Every single one of our sales team members can— knows, knows everything and more that they need to know about ERTC. So please book some time with them. They'll help walk, you know, specifically through your situation. And if we can help, if this is something that, that we can help with, we'll get you set up right away.

All right, my man. Enjoyed having you back on.

Awesome. Thanks so much, Bradley.

Hey, I hope all of you are enjoying these new Wednesday episodes. We're going to continue with this and I just want to share in addition to obviously last week we talked about CFO services, this week ERTC, we're going to talk about— we're going to do some webinar recast in the future. We're going to have the Club Capital leadership team come on in the future. We're going to talk about the value of tax planning, what some common cash flow pitfalls are, etc., doing lot to just continue to add value. So if you could do me a favor and just share this with one other person and then maybe consider giving us a 5-star review on Apple or on Spotify, that would help us so much to be able to reach other small business owners and agency owners just like yourself. All right, everyone. Hey, give a shout out to our podcast sponsors, DirectClicks, obviously Club Capital, Coach P. And Rock Solid Assistants. They've been with us for a really long time. If you want to be able to hire our growth assistant to help you in your small business, whether that's through marketing services, digital marketing, whether that's with— oh goodness, Ellie on my team does so much, you know, whether it's social media content planning, etc. Rock Solid can help put an assistant to be able to help you with all those things, in addition to being able to help you hire an executive assistant. Which I've started calling more like a growth assistant because at the end of the day, that's really what it helps to do. So go to rocksolidassistance.com. And speaking of marketing, if you want to be able to grow your business with high-quality leads for your sales team, there's none better to work with than DirectClicks. Go to directclicksinc.com. And if you want to develop your team so that they have— once they have those leads, they actually learn the right word traps word tracks and scripting around being able to have more conversions with those leads. That's when developing and pouring into your team is so important. And David just does a fantastic job in his program, Coach P. Meet twice a week with him. Um, obviously there's an agency-only call and your team members can join in this. And I think that's a huge value add that's very different from a lot of programs. Is that not only you get developed, but also your team does. Somebody's getting it done at the highest level. Go to coachpconsulting.com. All right, everyone, till next episode, lead well.

So the big question is this: how do small business owners like us grow our leadership, develop our teams, and scale our business in a way that allows us to get our products and services out to the world, yet still will remain profitable? That is the question, and this podcast will give you the answers. I'm Bradley Hamner, and this is the Club Capital Leadership Podcast. Hey, before we get into today's episode, did you know that Club Capital is the largest accounting advisory firm for insurance agency owners in the country, providing monthly accounting, CFO services, and tax preparation? Check them out at club.capital.