The pandemic has caused the legal industry to suffer in a variety of ways. With courtrooms and government buildings closed, law firms and attorneys were forced to find new means of providing their services. For those that specialized in settlements, there was an additional challenge: the opposing party or company being sued had zero incentive or pressure to settle because they knew they were not going to court anytime soon.
The lack of motivation for companies to settle was taking its toll on lawyers who relied on these cases as a source of income. To combat this issue, the IRS implemented the Employee Retention Credit (ERC) program, which could be applied to businesses like law firms and attorneys alike.
Don’t let the economic issues of COVID-19 put damper your law firm or attorney office’s earnings. The Employee Retention Credit (ERC) Tax Refund is still available to you in 2022, 2023, and 2024 – just make sure to meet its criteria related to quarters in 2020 and 2021, plus calculate the percentage of payroll paid during that time. Enjoy getting back some of the money you put into your business.
Contrary to what your accountant, financial expert, or tax consultant may have told you, your law firm DOES NOT NEED to be closed entirely to qualify for the Employee Retention Credit. Partial shutdowns will still suffice. Don’t rely on the misleading information provided by professionals unaware of all the detailed guidelines that pertain to the ERTC.
The IRS ERC regulations determine that law offices may be eligible for the beneficial tax credit if they were impacted by government-issued restrictions due to COVID-19. From when these stipulations began until their conclusion, your office has met the requirements of the refundable ERC Credit. Take advantage of this opportunity and receive back what you deserve!
If your law firm is wondering what exactly is this credit? How does it help law firms? And how can lawyers take advantage of it?
Look no further. This Quick Start Guide for Law Firms will provide you with all the criteria and resources needed to determine eligibility, apply successfully, and maximize its tax refund benefit. By taking advantage of this comprehensive guide now, you’ll be able to understand precisely what is required of your business in order to qualify for this invaluable resource.
Key ERC Credit Takeaways You Will Learn:
- ERC for Law Firms: Understand the applicability of Employee Retention Credit for law firms.
- Eligibility Requirements: Learn the specific eligibility requirements for law firm employees.
- Claiming ERC: Discover how law firms can claim the Employee Retention Credit.
- Maximizing Benefits: Uncover ways to maximize Employee Retention Credit benefits for your law firm.
- Avoiding Mistakes: Get insights on common mistakes to avoid during your ERC claim process.
See Important 2024 Employee Retention Tax Credit Deadline Information at the Bottom of This Article.
What Is the Employee Retention Credit for Law Firms, Attorneys, and Lawyers?
Law firms, attorney offices, and specialized law service providers are eligible to benefit from the Employee Retention Credit (ERC). They can receive up to 50% of their qualified wages paid between March 12th, 2020, and December 31st, 2020, in the form of a refundable tax credit.
Businesses that were established before February 15th, 2020, can receive a refundable tax credit amounting to 70% of qualified salaries and wages paid between January 1st, 2021, and September 30th, 2021. For law firms created or acquired after the said date (also referred to in IRS ERC terms as Recovery Start-up), they are eligible for employee wage reimbursement up until December 31st this year.
The CARES Act (Coronavirus Aid, Relief, and Economic Security) was created to help small and midsize businesses, such as Law firms, experienced tax attorneys, and other law services providers, sustain their payroll during the pandemic. Its ultimate goal is to keep employees on staff rather than resorting to layoffs or furloughs.
The ERC has been substantially modified since 2020, with the Infrastructure Investment and Jobs Act limiting its applicability to wages paid before October 1st, 2021. However, recovery startups working towards recuperation can still benefit from its advantages until 2022. With its extended eligibility guidelines, the ERC is still available and accessible to business owners.
How Does the Employee Retention Credit Work for Law Firms Employees?
With the requirements and amount of credits continually changing with the ERC program, lawyers and law firm owners may find it difficult to understand if they qualify and how much they can get back. To maximize the benefits from this tax credit, you must take the time to identify which quarters are eligible as well as which employees, wages, and payments meet the criteria for receiving the credit.
Employers must first ascertain if they are eligible to receive the Employee Retention Tax Credit before manipulating their payroll tax deposit and noting the amount on IRS Form 941-X. The amended Employer’s Quarterly Federal Tax Return (Form 941) should be submitted within 30 days of a quarter’s end for it to be accepted.
When the credit surpasses the tax deposit, employers have traditionally requested an advance payment with Form 7200 (no longer applied for ERC) to obtain a refund of any extra money. But since the program has terminated, claiming this credit requires a different approach.
Even though the Employee Retention Tax Credit program has come to an end, you may still have a chance of claiming the credit for eligible quarters within three years following its conclusion if your business obtained a Paycheck Protection Program (PPP) loan, that also doesn’t disqualify you from doing so.
Pro Tip: Be sure to use your business’s gross income (before deductions) and the total number of employees in order to calculate the ERC amount you are eligible for.
Claiming the tax credit for quarters ending on or after September 30th, 2021, will be quite different. Law firm owners must first confirm the details of their unique situation to be eligible for this financial assistance.
To receive the full benefit of this credit, it is essential that these business owners document and prove how they were impacted by COVID-19, either through revenue loss or physical court trial limitations, as well as verify payment services to all employees during quarantine measures. Therefore, accurate records such as payrolls showing pay periods and qualified wages paid should always remain on file for review if needed.
Employee Retention Credit for Law Firms Employees: Eligibility Requirements
Absolutely! Legal consulting firms can take advantage of employee retention credit in two distinct methods.
- For a law office to be eligible for the program, it must have gone through an entire or partial closure because of COVID-19 government regulations or any other kind of government-mandated shut down during certain periods in either 2020 or 2021 as a result of this global pandemic.
- A law firm must demonstrate that it has had either 1) a 2020 quarter with gross receipts at least 50% lower than the same quarter in 2019 or 2) 2021 quarters with 20% fewer gross receipts compared to the corresponding quarters of 2019. Put simply, each three-month period of 2020 and 2021 should be measured against its equivalent month period in 2019.
Consider this scenario: a law firm experiences a gross revenue of $100,000 in the second quarter of 2019 and then sees that number drop to just $50,000 during the same period in 2020. That would qualify as a significant decline in gross receipts. The criteria are also met when your business obtains $80,000 for 2021’s Q2 – representing another considerable dip from previous years.
The following are some examples of gross receipts:
- Total sales and revenue received (before any deductions).
- This fund consists of proceeds from both investments and grants.
- This encompasses any profits earned through investments.
- Royalties and annuities.
- The adjusted basis in certain property used in a trade or business, such as capital assets sold, is not reduced by the taxpayer.
- Rents.
- Interest.
- Dividends.
As a legal firm owner, you may be eligible for the Employee Retention Credit (ERC) tax credit if your business had less than 100 employees in any quarter of 2020 and/or 500 or fewer employers in 2021 – regardless of whether they were full-time or part-timers. To help you during these unprecedented times when many businesses have been forced to close their doors due to COVID-19, the IRS has designed conditions so that law firms can take advantage of this benefit.
They are as follows:
1. Full Shutdowns
If your legal consultancy office was fully shut down for even a few days due to COVID-19, it would qualify your law firm for the ERC tax credit.
2. Shuttered Courts
Maybe your office is not in the state or county where the courtrooms are, and the local government courtrooms and legal buildings were closed mostly. In this case, you were not able to proactively pursue cases; therefore, the opposing party or company being sued had zero incentive to settle. This is a valid situation for you to receive the tax credit.
3. Limitations on Jury Trials
Due to the shutdown in court operations, the number of jury trials is greatly reduced. This means that even if your legal office is not in the area of the closed courtrooms, you can still be eligible for the tax credit.
4. Prohibited In-Person Depositions
The inability to conduct in-person depositions has also led to decreased civil court proceedings. Therefore, you may qualify for the tax credit if your law firm has been affected by this limitation.
5. Prohibited In-Person Meetings with Incarcerated Clients
In some cases, due to the pandemic, attorneys are not able to meet with their incarcerated clients in person. This can be an obstacle for attorneys in defending their cases. If your legal office is dealing with this situation and has had a decrease in revenue due to it, you may be eligible for the ERC tax credit.
6. Reduction in Services Offered to Your Clients
For whatever reason, some law firms may have had to reduce their clients’ services due to COVID-19, such as not offering in-person consultations because, for clients, it was not easy to come to the office due to travel restrictions or self-quarantine requirements. If that is the case for you, your legal consultation may be eligible for the ERC tax credit.
How to Calculate the Employee Retention Credit?
Accurately calculating the employee retention credit for legal services requires keen attention to detail, especially when it comes to determining your total gross wages paid during a quarter. Without accurately calculating this figure, you won’t be able to receive the full benefit of this tax credit. Therefore, having a comprehensive understanding of how best to calculate these figures is essential.
Pro Tip: Must track employee wages, salaries, and payroll information carefully. This will ensure that you have accurate records in the event of an IRS audit.
Law firms that are eligible to receive the employee retention credit can take advantage of three types of reimbursement: wages and FICA-tax compensation, plus a selection of qualified health expenses. These appropriate remunerations must have been paid out between March 12th, 2020, and September 30th, 2021, to employees still employed within their company to be valid.
Note: It is important to note that PPP loan-funded wage expenses are not eligible for Employee Retention Credit disbursement. Therefore, it would be more advantageous to utilize your PPP loans towards non-wage expenses or wages that won’t generate credit.
Here are the governmental stipends for 2020 and 2021:
- For 2020: Employers can receive up to a 50% creditable wage of their employee’s first $10,000 in qualified wages – resulting in an Employee Retention Credit refund of up to $5,000 per worker. This incredible benefit is deducted from each employee’s total payroll costs – saving companies potentially thousands of dollars!
- For 2021: The ERC credit was a more rewarding option in 2021. The IRS will generously cover 70% of an employee’s initial $10,000 in qualified wages each quarter per worker! This could result in up to a jaw-dropping $7000 refund for that same individual and employer for every three months spent together this year! And with such an incredible incentive offered by the Internal Revenue Service, you can reduce your total payroll costs by as much as $7000 per person each quarter.
By taking advantage of this opportunity, total payroll costs could be reduced by as much as $26,000 for each employee through 2020 and 2021.
You can read our detailed guide on ERC calculations here.
How Can Law Firms Employers Claim the Employee Retention Credit?
Although the process of applying for the ERTC has changed a bit, there’s still time to claim your tax refund. Remember that this window won’t be open forever – it’ll shut in 2023, 2024, and 2025 based on 2020-2021 quarter evaluations. Don’t worry about running out of funds either; these refunds are calculated using each business’ qualifications and financials – so don’t hesitate any longer! The only way you can miss out is by not filing prior to the given deadlines.
The Internal Revenue Service has established multiple paths for an eligible law firm to apply for the Employee Retention Credit. Most often, businesses must file Form 941-X quarterly in order to qualify; unfortunately, this form cannot be filed online and instead must be mailed to the IRS as a physical document.
Note: Law firms that obtained Round 1 or 2 of SBA PPP loan funds should reach out to an ERC Tax Refund Consultant for advice on the proper deductions according to IRS guidelines, allowing them to make the most of their employee retention credit tax refund benefits.
How Can Law Firm Owners Use the Employee Retention Credit to Their Advantage?
Eligible employers can use the Employee Retention Credit to their advantage in several ways. Some of these benefits include:
1. Using the Employee Retention Credit to Support Your Company
If you are eligible, you have paid wages to your employees in hard times, and now, if you can claim the ERTC, you can use it to support your business further. This could be used to pay the salaries of full-time employees, cover business-related expenses, and more. In legal firms, expenses could be utilized for back office and business operations or for marketing and making the business more visible.
2. Investing in Employee Training and Development
What’s even better is that the ERTC can also be used to invest in employee training and development. Business owners have the incentive to motivate their employees, as this type of investment could be used to enhance business operations, customer service, and productivity.
Trainings like business communications, business development, and networking can all be used to help business owners better respond to customers’ needs and increase revenues over time.
You may have interns hired too, so these trainings can help to prepare them for the business world and their role as an employee.
Another idea is that you do workshops at law schools or colleges for business and legal students. This could be a great way to get the business and name out there, as well as help build relationships with future potential employees.
3. Using the Employee Retention Credit to Invest in Technology
Technology can be a great way to help business owners automate operations, improve customer service and performance, and increase business efficiency. As a law office, you might use the ERTC to purchase business software and hardware or to upgrade existing technology.
You can use this technology to improve business operations and performance, such as; tracking business metrics, streamlining processes like court filings, or even using AI to assist in business management and operations.
4. Good News – No Limitations or Restrictions on How You Can Use Your ERC Tax Refund
As long as your business qualifies and you have part-time or full-time employees employed, the way you use your tax refund is up to you. There are no limitations or restrictions on how you can use your refund as long as it relates to business operations and is reported correctly.
So, don’t miss out on this important business opportunity by not claiming the ERTC prior to the appropriate deadlines.
Case Study of the Employee Retention Credit in Action
Do not believe the ERC is too hard or complicated. Many law businesses have already taken advantage of this tax credit through Disaster Loan Advisors’ expert specialized help, and yours could be next.
Here is an ERC Law Firm Example:
In 2019, prior to the pandemic, Family Law Firm reported a successful year with $3.1 million in total sales and revenue. However, 2020 was not so favorable due to an abrupt halt of 50% of their working hours spent in courtrooms providing services as courts across the country closed. Fortunately, 2021 has seen some mild recovery for them, accumulating a sum of $2.7 million received overall – still slightly below pre-pandemic earnings but demonstrating growth nonetheless.
Owing to pandemic-induced regulations, Family Law Firm’s litigators were incapable of practicing in the courts. As there was no virtual equivalent available for them, business operations had been partially halted since they could not replicate similar tasks remotely.
To gain clarity, after subtracting expenses and costs, such as court proceeding fees ($912,000), employee labor ($900,000), rent ($135,000), and other expenses ($621,0000), their net profit were calculated at $132,000 for the year. Fortunately, the ERC refund eligibility and receipt do not require a net profit or loss.
During 2020 and 2021, the law firm received an extraordinary sum of $800,000 in two Paycheck Protection Program (PPP) loans that the Small Business Administration subsequently forgave.
Excitingly, the IRS has now reversed its previous stance on this matter. As long as PPP loans are properly accounted for in ERC credit calculations, businesses that have received them can still be eligible to claim said credits! This is a substantial development and great news for businesses looking to maximize their financial potential.
After late March 2020, when mandated restrictions were put in place up until mid-June 2021, the family law firm earned an Employee Retention Credit Tax Refund of a whopping $260,814.
After calculating out more than $800,000 in PPP loans and omitting majority owners and family members, the family law firm received a total ERC credit of $260,814 – a real tax refund check issued by the Internal Revenue Service. This was composed of an impressive sum of $92,638 for 2020 plus a remarkable additional amount of $168,176 for 2021.
Without expert advice, this law firm could have lost out on all those valuable earnings. Fortunately, they took the initiative to gain a comprehensive understanding of how to maximize their ERTC benefits and ended up reaping tremendous rewards.
Although their Certified Public Accountant (CPA) informed them they were not qualified for the ERC; they could not have been more wrong. Their accountant did not bother to thoroughly educate themselves on the intricate and complicated Employee Retention Credit program, which impacts both their own business as well as those of their clients.
In conclusion, the Paycheck Protection Program enabled business owners to pay their payroll costs during mid-2020 and early 2021. In addition, the IRS Employee Retention Tax Credit program provided extra cash reimbursement for up to four more years. With rising proceeding & wages expenses, as well as lawyer services fees – this economic aid was an absolute lifesaver for law firms and other businesses across America.
Comprehensively analyze the specifics of the ERC and have meaningful discussions with experienced ERC tax experts to perceive how this credit works in combination with other programs like PPP. This will allow you to maximize your firm’s potential for long-term success through much-needed fiscal reimbursement.
The law firm’s story serves as a prime example of how the Employee Retention Credit Tax Refund can be properly utilized to improve a business’s bottom line amidst such tumultuous times. The importance of consulting with the right tax experts and staying up to date on ever-changing IRS policies cannot be emphasized enough.
Maximizing Your Employee Retention Credit Benefits: 6 Essential Tips for Law Firms
Because of the pandemic, business operations have been greatly affected. As a business owner, you may be eligible to receive the Employee Retention Credit (ERC). Here are some tips that can help law firm owners maximize the benefits of claiming ERC:
1. Keep Detailed Records of Employee Wages and Other Eligible Expenses
For legal firm owners, keeping meticulous records of employee wages and qualified costs is crucial in order to maximize the Employee Retention Credit. These particulars include tracking every worker’s salary as well as related expenses like health insurance premiums or contributions to retirement funds. Possessing precise and current information will simplify the process of determining your credit amount when filing taxes.
2. Understand What Is a Qualified Wage
Qualifying wages for the deduction are not restricted to gross pay. They encompass everything you spend on full-time and part-time employees and any health plan expenses you cover in their stead — provided there were 100 or fewer paid staff members per quarter during 2020 and 500 or fewer paid employees each quarter of 2021.
The total cost for an employee’s healthcare is a combination of the employer contribution and their pre-tax payments. Contributions made by employees after taxes are not taken into consideration when calculating this total.
3. Check the Eligible Wage Date Ranges for Law Firms employees
It is essential to understand the various dates used to determine if your employee’s pay rate qualifies for ERTC funds. According to the CARES Act, qualifying periods are from March 13th, 2020, until December 31st, 2021 (for Recovery Start-up legal firms) and September 30th of, 2021, for most other businesses. Failing to recognize these times may mean that you miss out on potential funding.
If law firm owners have paid employee wages either before or after the ERTC eligibility dates, those wages, unfortunately, will not be eligible for ERTC funding.
4. Find Out if Your Firm is Eligible
To ensure you are eligible for the ERTC, make sure to review your eligibility criteria, such as any full or partial shutdowns or business declines due to COVID restrictions. Additionally, make sure your business qualifies for the ERTC – specifics vary by business type.
This is only applicable if there has been a “significant” decline in gross receipts. Such as at least -50% of the earnings from 2020’s same quarter vs. 2019 – or for 2021, it must be lower than 20% compared to what was made back in 2019.
5. ERC Affiliation Rules
Companies must be aware of the criteria for employers to qualify under Sections 52(a), 414(m), and 414(o) of IRS regulations. The Employee Retention Credit (ERC) has distinct rules from the Paycheck Protection Program (PPP). When examining employee counts and gross income decreases, ERC requires that affiliated businesses are taken into account with its controlled group concept as one single taxpayer eligibility.
6. Learn How to Calculate the ERC
The laws have shifted significantly in the past few years, so it can be a bit confusing. At its core: for 2020, take your qualified wages (up to $10,000) per worker and multiply by 50%. For 2021 you’ll also need to calculate up to $10,000 of qualified wages per employee each quarter and then times that number by 70%.
In conclusion, the calculation of your ERC credit refund may vary from year to year. It’s wise to speak with an experienced professional in this field since it can also be impacted by other elements.
Steer Clear of These 7 Mistakes During Your ERC Claim Process to Ensure Maximum Success
As you consider the substantial amount of up to $26,000 to $33,000 per employee that you could claim through the Employee Retention Tax Credit (ERTC) for the 2020 and 2021 tax years, it may prompt you to act swiftly and submit your claim.
Yet now that calculating how much is owed is required along with ensuring everything has been correctly organized before filing – law firm owners should be mindful of any missteps they might make when claiming their ERTC:
1. Guessing How Much ERC Credit You Qualify For
While it may be tempting to see the generous $26,000 per qualifying employee offered by the IRS and calculate a seemingly huge payout for businesses with multiple employees, navigating legal paperwork in regards to this initiative is no simple task.
The IRS does not accept approximations – accurate calculations must be provided according to their regulations. Consequently, taking full advantage of these benefits requires more than just basic math skills.
Unraveling the complexity of potential tax credits for your business can be a difficult task. To ensure your claim to the IRS is accurate, it’s important to enlist professional assistance in calculating what you may receive.
The Employee Retention Credit (ERC) isn’t an application process like many other programs; instead, it relies on qualifying criteria and specific figures from your taxes before filing with the IRS.
2. Thinking You Do Not Qualify or Disqualifying Your Business Before Getting the Consultation of an ERC Tax Specialist
The CARES Act and the ERC eligibility requirements can be complex and intimidating to many law office owners, causing them to quickly disqualify themselves without consulting a tax specialist. Don’t make this mistake – speak with an ERC tax refund professional who can provide you with an in-depth analysis of your legal consultancy business or law firm group so that you can determine your full eligibility for the program.
3. Failing to Document Your ERC Claim Properly
As with any major application process, a lot of paperwork is required for the ERC claim. This entails having accurate records of employee salaries and wages from 2020 and 2021, along with other pertinent documents needed to complete the application. Without proper documentation, your claim will be rejected by the IRS, and you could be liable for any of the funds you’ve already collected.
4. Claiming Unqualified Wages on Quarters That Do Not Qualify
To take full advantage of this refundable credit, ensure that you are claiming all the eligible wages and health care costs. Given the numerous changes to this program, it’s easy to overlook some important items. The best way to move forward is by only declaring wages from quarters that meet qualification criteria.
5. Despite the Fact That My Law Firm Remained in Operation throughout the Pandemic, Am I Still Ineligible to Apply?
Absolutely not! Even if you had a partial shutdown, the Employee Retention Credit might still be applicable. If your law office has remained open but experienced a considerable decrease in your gross receipts compared to 2019, there’s still hope for you. It all comes down to how much of an income drop from last year you’ve faced.
In the United States, almost every business was required to shut their physical locations at intervals and then were mandated to limit customer interactions by 25%, 50%, or 75%. Others had to reduce their hours of operation.
These are all legitimate and permissible circumstances that qualify your business for the duration of the enforced restrictions by any state, county, city, or local government – regardless if you earned more in 2020 and 2021.
6. Paying a Percentage of Your ERC Refund to ERTC Specialist (HINT: The IRS Says NO WAY!)
If a company attempts to charge you any percentage, ranging from 10% to 30%, make sure your feet are running in the opposite direction.
*THE IRS CLEARLY STATES THIS IS AGAINST THEIR RULES AND REGULATIONS.*
It is a violation of Internal Revenue Service regulations for companies to charge any percentage or contingency fee when it comes to amending tax returns in order to obtain refunds. Nevertheless, many organizations are still committing this illegal act. The IRS will not tolerate these sorts of practices!
Read the full IRS details under Section § 10.27 Fees on page 21 and page 22 here:
According to the IRS, it is explicitly stated that:
“…..may not charge a contingent fee for services rendered in connection with any matter before the Internal Revenue Service. A contingent fee includes a fee that is based on a percentage of the refund reported on a return, that is based on a percentage of the taxes saved, or that otherwise depends on the specific result attained.“
To comply with IRS regulations, ANY employer that seeks to receive the Employee Retention Credit must carefully adhere to all specific rules and requirements set forth by the Internal Revenue Service.
RUN THE OTHER DIRECTION from paying a percentage!
Additionally, be wary of the ERC Mills that charge a percentage or contingency fee based on your refund. These “ERC Mills,” as they’ve been coined by media outlets, are either knowingly or unknowingly exaggerating and falsely qualifying businesses’ eligibility due to their reliance on inflated figures for payment – no matter how excessive those numbers may be.
There is always a risk of encountering an unscrupulous ERC Mill that will take advantage of you and your business. Such practices could put your legal firm in jeopardy while also costing you hundreds or even thousands of dollars more than necessary due to their grossly inflated fees. Protect yourself by being aware and discerning when seeking out the right ERC for your establishment’s needs.
Unfortunately, if the IRS discovers that an ERC claim was exaggerated or even falsified, the business owners will be held accountable for their actions. This could be potentially devastating to both parties as they must face any penalties imposed by the government.
Risks are endless if you are working with the wrong people, so do your due diligence and find competent help to ensure you are doing things the right way.
7. Failing to Seek Expert Guidance from a Knowledgeable ERC Specialist in Accounting, Tax Advisory, and ERTC Tax Credits
In the past year, numerous purported ERC professionals have emerged. Enter “Employee Retention Credit” into a Google search, and you will be inundated with sites proclaiming to be an ERC master in tax breaks.
It’s a concerning problem that many of these new websites are actually affiliates commissioned by ERC Mills, taking 30% or more out of your tax refund. This commission is hefty and often charged to business owners without them being aware. Unfortunately, most of these affiliates have little proficiency in the ERTC system beyond sales tactics.
Disaster Loan Advisors has been an invaluable asset for 1500+ businesses facing difficulties, providing guidance on the SBA programs and supporting 400+ of these companies with their Employee Retention Credit. Their methodology is rigorous, ensuring it aligns perfectly with IRS rules and regulations for this program, granting comfort that you are receiving up-to-date advice from experts in the field.
With DLA, law firm owners can easily understand the process of qualification for quarters, payroll calculations made, and subtraction of any PPP loans. Furthermore, they are able to accurately remove majority owner wages along with family members or relatives who are related to a majority owner from their records.
Businesses can be confident that their ERC refunds are maximized and qualified according to the IRS’s official ERTC program design. Everything is handled step-by-step and in accordance with all applicable IRS regulations, providing complete safety and compliance.
DLA provides a cost-effective solution to its customers in the form of an affordable flat fee based on the volume of work required. You don’t have to pay extravagant percentages, as is usually true with your accountant or tax advisor when filing business taxes; instead, you can trust DLA and its fair pricing model.
Schedule a free ERC consultation to review your legal business ERTC tax credit in detail.
ERC Frequently Asked Questions (FAQ)
To help you with topic understanding, here are some answers to the most common questions business owners have when considering ERC claims.
Do The Bonuses Employees Earn Count Towards the Employee Retention Tax Credit?
Absolutely! Tips awarded to employees may be used as part of the Employee Retention Tax Credit (ERTC) if they meet certain criteria established by the Internal Revenue Service. If an employee’s tipped wages for any given month exceed $20 and are subject to FICA withholding, those tips can then be applied toward ERTC benefits.
Would It Be Better If I Combined The Gross Receipts From All Of My Law Firms?
Depending on the situation, legal firms that are part of a group may be able to qualify for a credit based on their total gross receipts – provided they meet or surpass an amount specified by the IRS. This provides individual eateries in said groups with an opportunity to still claim this benefit, even when the collective sum of all participating venues falls short of expectations.
What Is the Cut Off to Apply?
The tax credit has expired, but eligible employers are still entitled to seek reimbursement for qualified wages paid during the designated time frame. Businesses should act quickly and submit their claims before 2023 comes to a close; this critical cut-off date is 2024.
With the deadline quickly approaching, now is your chance to review payroll costs from 2020 and 2021 and seek expertise in order to take advantage of Employee Retention Credit. As you may know, it can be a difficult task due to all the modifications made by various applicable acts.
How Much Can Law Firm Claim?
Law firms are eligible to claim up to 50 percent of their qualified wages paid in any given quarter in 2020 and 50 percent of qualified wages paid in 2021. The maximum amount that can be refunded depends on several factors, such as:
- During which quarters are the employee qualified to submit a claim?
- How many staff members remain employed?
- Did the company apply and get approved for a Paycheck Protection Program (PPP) loan?
If I qualify under the Government Mandate Test, does that automatically qualify me as an eligible employer for the entire quarter?
Yes, that’s true; however, you must pay only qualifying wages as long as the mandates are in effect and they’re significantly affecting your business.
Do I take the ERC into income when I receive it?
No, the ERC is a non-taxable refundable tax credit and does not need to be reported as income. It can be used to offset payroll tax liabilities for the applicable quarter.
Does the Employee Retention Credit have to be paid back?
Absolutely not! The Employee Retention Credit is an entirely refundable tax credit available to eligible employers, and it’s applied against certain employment taxes. This isn’t a loan that needs to be paid back; instead, most taxpayers obtain the refundable credit in excess of the payroll taxes they pay during any given period.
How Does the Number of Employees Impact Employee Retention Credit and Qualified Wages?
The number of full-time employees plays a huge role in the qualified wages eligible for the retention credit. Prior to submitting your claim, it’s important to ascertain and confirm exactly how many full-time staff members you had during 2019 – because, according to this scheme, each must have worked at least 30 hours per week or 130 hours during every calendar month.
Are Employee Retention Credit benefits the same for large and small employers?
Small employers reap greater rewards when partaking in the ERC system. Specifically, while they remain as Eligible Employers, all employee wages can be taken into account. On the contrary, large companies are only allowed to include payment for services not actually rendered by their staff members.
How long does it take for the IRS to provide a refund after filing an amended Form 941X?
We have noticed that the IRS typically takes around nine months to process a refund after you submit an amended Form 941X. However, the amount of time it takes for you to receive a refund depends on several factors, such as the volume of amended forms they are processing, changes in the tax laws and regulations, and the amount of time you have taken to file a claim. So, it is recommended that you keep up with the latest tax regulations and file your amended Form 941X as soon as possible.
Can I get both the ERC and PPP loans?
Yes, you can apply for the ERC even if you have a PPP loan during restrictions due to the COVID-19 pandemic. The ERC is a completely separate program from the PPP loans and does not affect your ability to receive funds from either of them. However, the wages you paid through PPP loan funds cannot be counted towards the wages used to calculate the ERC.
What Are the Types of Law Firms and Practice Areas of Law That Will Qualify?
Here are the types of law firms and practice areas that will qualify:
- Banking and Debt Finance lawyer
- Civil litigation dispute resolution attorney
- Commercial lawyer
- Intellectual Property lawyer
- Consumer lawyer
- Personal injury and clinical negligence attorney
- Immigration and labor attorney
- Charity lawyer
- Complex litigation attorney
- Aviation attorney
- Arbitration lawyer
- Trust and Estate attorney
- Tort Lawyer
- Sports lawyer
- Gaming lawyer
- Media attorney
- Corporate lawyer
- Criminal attorney
- Employment lawyer
- Environmental attorney
- Family lawyer
- Construction attorney
- Housing lawyer
- Human Rights attorney
- Elder lawyer
- Immigration and Asylum lawyer
- Insurance lawyer
- Public companies and equity finance attorney
- Private client lawyer
- Property lawyer
- Animal Rights attorney
- Restructuring and insolvency lawyer
- Shipping lawyer
- Social welfare lawyer
- Tax attorney
- Technology lawyer
- Utility lawyer
There are many more types of lawyers and legal areas of specialization that are eligible. If your law firm serves any type of law specialization, you probably qualify.
Conclusion and Summary for Law Firm Employee Retention Tax Credits
To ensure you are in compliance with the Employee Retention Credit, it’s critical to keep all original records, including paystubs, W-2s, and other documents related to employee wages. Additionally, any government orders or restrictions resulting in a lower gross revenue should be documented.
By understanding the rules of the credit, law firms can make sure they’re getting all benefits due to them, helping lessen the financial burden this pandemic may have caused. The ERTC provides a great opportunity for businesses affected by COVID-19 to gain some financial stability — so don’t miss out on this valuable tax credit if your law firm qualifies(even if revenue has increased).
Law Firms Qualify: Get Help on How to Apply for the Employee Retention Tax Credit (ERC / ERTC): Claim Up To a $26,000 Refund Per Employee for Your Law Company
Disaster Loan Advisors™ can assist your law business with the complex and confusing Employee Retention Credit (ERC) and Employee Retention Tax Credit (ERTC) program, without you having to sacrifice an excessive percentage of your hard-earned ERC refund.
DLA doesn’t charge a percent like many companies do. Our flat fee structure is fair and reasonable based on the amount of work involved. Keep More of Your Refund™
Depending on eligibility, legal firm owners can receive up to $26,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.
The ERC / ERTC Program is a valuable IRS tax credit you can claim for your law business.
Schedule Your Free Employee Retention Credit Consultation to see what amount $ of employee retention tax credit refund your law firm qualifies for.
ERC Deadline Urgency in 2024
April 15, 2024 Deadline for the 2020 ERC Tax Year
The deadline is coming up for the final opportunity to retroactively claim your business Employee Retention Credit for the past 2020 tax year. With the April 15, 2024 deadline fast approaching, we urge you; don’t let this final chance pass!
While not all businesses will qualify, as it depends on multiple factors per IRS Rules and Guidelines, you might be leaving significant financial relief on the table from prior COVID impact to your business during the past 2020 and 2021 business operation years.
Last year, in September 2023, the IRS temporarily paused processing ERC Claims for the remainder of last year. We at Disaster Loan Advisors (DLA) predicted this over one year ago when we made this ERC video warning business owners. See the ten-minute mark of the video for details.
TAKE ACTION NOW IN 2024
Even though the IRS has temporarily paused processing, you will still want to check eligibility and file now (if you qualify) because once the IRS will resume processing, ERC tax credit claims are processed in the order they are received.
If you haven’t previously filed for the ERC Credit, it is worth scheduling a phone call to at least explore your possible eligibility from both the past 2020 and 2021 business tax years. Contact us today for a deep-dive analysis to determine if your business qualifies one or more quarters from the 2020 and / or 2021 tax years.
As a leading dedicated member of the Tax and Accounting Team at Disaster Loan Advisors™, Mark focuses on unlocking the ERC Tax Credit's potential for eligible firms that qualify, providing strategic advice, and detailed guidance to ensure substantial financial recovery and growth. His methodical approach to client engagement includes comprehensive deep-dive analysis, customized consultation and guidance, and a commitment to achieving tangible results for each business served.
Disaster Loan Advisors™ (DLA) offers a comprehensive suite of services designed to navigate the complexities of the Employee Retention Tax Credit (ERC) program, ensuring that qualified businesses leverage the maximum possible benefit with minimum hassle. Unlike some firms that charge exorbitant contingency or percentage-based fees (often between 10% to 30% of your ERC refund), DLA operates on a fair and reasonable, transparent flat-fee structure that aligns with the IRS's guidelines.
If you are looking for an ERC Company that believes in providing professional ERC Services and value for small business owners, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors™ is a good fit for you. STAY SAFE. STAY COMPLIANT. KEEP MORE OF YOUR REFUND.™