ERC Group coming to the territory to support businesses impacted by COVID

Pago Pago, AMERICAN SAMOA — The Employee Retention Credit (ERC) Group will be arriving in American Samoa this week, July 13 and will be here through July 24, 2023.

In recent emails to Samoa News, ERC Mission ERC co-founder Kristal Tabangay-Barnhill and one of the group’s team members — Ms Tina Azavand, JD, tax manager for strategic tax planning for ERC, responded for the ERC group team to questions concerning the group’s upcoming mission to American Samoa.

Samoa News queries focused on local eligibility and the warning the IRS puts out about the legitimacy of ‘tax preparers’ — especially as the group is not locally-based.

According to the ERC Group, the Groups’s primary mission in the Territory is to raise awareness and support fellow business owners who have been financially impacted by the COVID-19 pandemic.

When asked about how employers qualify to take part in the ERC, they said it is a refundable and advance-able tax credit for small businesses based on their number of qualifying W-2 employees.

They offered the following as to how the Employee Retention Credit is calculated:

Eligibility includes Test 1 — Decline in Revenue for the 2020 calculation, the gross receipts of such employer are less than 50 percent of the gross receipts for the same quarter in the calendar year 2019.

For the 2021 calculation, the gross receipts of such employer are less than 80 percent of the gross receipts for the same quarter in calendar year 2019. Special rules apply if the business did not exist prior to February 15, 2020

Test 2 — Full or Partial Suspension of Operations Due to a Government Order: An employer that had its trade or business operations fully or partially suspended by a government order may be eligible for the Employee Retention Credit, regardless of its gross receipts.

Currently according to the ERC group, they are collecting documents and already processing them “for more than a 100 business in our pipeline, mainly in these industries: Restaurants, Travel agency, Leasing space, Day care, Auto parts, Fitness gym facility, Retail, Hotels, Shipping services, Gas and service station, Pest control, Hardware, Car rental, Hospital, Non profit, Supermarket, Health care, Telco and cable, Fish market, Power utility, Agricultural Farming, Child development, Safety, sanitation and janitorial services, Retail and wholesale, Private School, Import and export, Freight forwarding, Transportation, Trucking and delivery Convenience store, Law firm, Salon, sewing and retail.”

This will be the first time ERC has come to American Samoa, and the group is planning to be here July 13- 24 2023. And while here, ERC will look at expanding its outreach to the local business community in American Samoa, to connect with organizations such as the American Samoa Chamber of Commerce, Department of Commerce, Rotary Club, the American Samoa Visitors Bureau, and to engage with the local business community.

According to the group, the IRS has been processing refunds within 6- 8 months. The checks are sent directly to the business owner.

It explains that the deadline for ERC claims for all quarters in 2020 is April 15, 2024; for all quarters in 2021, ERC claims must be filed by April 15, 2025.

The credit is available to both for- profit and non- profit organizations, including tax- exempt organizations.

The group says, “There are financial resources available to business owners who experienced closures, full and partial suspensions due to the pandemic, such as the Employee Retention Credit.

“ERC is a refund of wages paid to the employees during the pandemic.

“Business owners can get refunds up to $26,000 per W2 employee,” tax manager Azavand explained.

Furthermore she assures that, “There is a lot of money involved in this program that's why unlike many others who contact businesses through phone calls, we believe in establishing personal connections.”

She added that the ERC group is an active member of organizations like the Hawaii Restaurant Association, Hawaii Chamber of Commerce, Maui Chamber, Guam Chamber, and Saipan Chamber.

When Samoa News asked about the IRS warning that small businesses and tax-exempt organizations should steer clear of scammers promising big money with the ERC, the group responded that, "We are very aware of the IRS warnings and have been doing everything we can to warn others.”

Part of the IRS warning states that the “only way to claim the Employee Retention Credit is on a federal tax return.”  In response, the ERC group pointed out that while “this is correct,” the Employee Retention Credit however, is “an amendment to your quarterly payroll tax returns, there is no application like there was with PPP.”

(The PPP was the Payroll Protection Plan, a Small Business Administration-backed loan that helped businesses keep their workforce employed during the COVID-19 crisis. You had to apply to become a borrower.)

The IRS goes on to warn that “these scammers may lie about your eligibility.

“They might charge a big fee to ‘help’ you claim the credit.

“They line their pockets and leave you with big tax issues because if you claim the credit when you don't qualify for it, you have to pay it back.”

The ERC group said, “This is true, and it's often very difficult to recover those fees too, as many of the unlicensed companies handling ERC will not be around by the time you are audited years down the line.

“We intend to remain in practice after ERC, and actually even offer audit defense services.”

The IRS warning adds that to find details about eligibility and how to claim the credit the right way, visit IRS.gov/erc Correct. You should also be sure to review IRS Notice 2021-20, which includes a lot of the updated guidance on ERC.

IS THE ERC GROUP CHARGING FOR THIS SERVICE?

Ms. Tabangay-Barnhill said, “We do not charge any upfront fees, in fact, we defer our payment until after the refund check(s) are received. Strategic Tax Planning, who ERC represents, is a licensed CPA firm, thus, we are ethically prohibited from charging a percentage of the refund.

“Similarly, law firms are prohibited from charging a percentage of the refund. CPA firms and law firms alike are bound to these IRS rules, where this issue comes into play is when payroll companies get involved. Payroll companies are unlicensed, and thus are not technically bound to the same IRS rules.

“I will not name names, but one of the businesses doing the most work in American Samoa is an unlicensed payroll company charging 30- 35% of the refund amount, their background is in private equity, not tax.

“While not a percentage base, our fees typically don't even result to half of what this company charges and we are actually licensed.”

In reality, the Employee Retention Credit is a complex credit that requires careful review before applying, the ERC group says.

“We do not allow eligibility to be determined before analysis, and eligibility may only be determined after a thorough review by no less than three CPA's, including the owner, Glen Frost.

“Glen Frost is most known for his law firm, Frost Law, which staffs over 150 individuals and handles a lot of ERC. Frost Law is partnered with the National Restaurant Association, INSPIRE Brands, and many others.

The ERC Group also offers audit defense as a standard service to its larger clients (typically when they are receiving a refund of at least $750k).