By Ronnie Miles
Golf course owners across the nation are facing delays in receiving their Employee Retention Tax Credit (ERTC) payments, leading to widespread frustration and concern. The ERTC, introduced as part of the CARES Act during the COVID-19 pandemic, was designed to provide financial relief to businesses that kept their employees on payroll during the economic downturn. However, the anticipated speed of the process has not materialized. Understanding the reasons behind these delays and ensuring that your application meets IRS criteria are crucial steps in navigating this situation.
One of the primary reasons for the delay in ERTC payments is the sheer volume of applications the IRS has received. With thousands of businesses applying for this relief, the IRS is struggling to keep up, resulting in significant backlogs. This has inevitably increased processing times, leaving many applicants waiting longer than expected.
Another factor contributing to the delays is the complex nature of the ERTC eligibility criteria. The guidelines are intricate, requiring detailed documentation and strict adherence to the rules. The IRS must carefully review each application to ensure compliance, which adds to the processing time. Even minor errors or omissions can lead to further delays as the IRS requests additional information or clarification.
Changes in legislation have also played a significant role in the delays. Since the ERTC was first introduced, the rules surrounding the credit have undergone several revisions, creating confusion for both applicants and the IRS. These legislative changes have made it challenging for businesses to ensure their applications meet the latest requirements, often leading to the need for resubmission or additional documentation.
The extension of the ERTC beyond its original duration is one such change that has impacted claims. Initially, the credit was available for wages paid between March 13, 2020, and December 31, 2020. However, subsequent legislation extended the credit through December 31, 2021, adding another layer of complexity to the process.
In addition to the extension, the amount of the credit was also increased. Originally, businesses could claim 50% of qualified wages, up to $10,000 per employee for the year, with a maximum credit of $5,000 per employee. The updated rules, however, allow for a credit of 70% of qualified wages, up to $10,000 per employee per quarter, potentially providing a credit of up to $28,000 per employee for 2021.
Eligibility criteria were expanded as well. For example, the gross receipts test, which originally required a decline of more than 50% compared to the same quarter in 2019, was updated to a decline of more than 20% for 2020. Additionally, businesses that started operations after February 15, 2020, are now eligible as Recovery Startup Businesses, with a cap of $50,000 per quarter.
The interaction between the ERTC and the Paycheck Protection Program (PPP) has also changed. Initially, businesses that received a PPP loan were ineligible for the ERTC. However, this rule was later amended to allow businesses to claim the ERTC even if they had received a PPP loan, though wages paid with forgiven PPP loan funds cannot be used to claim the ERTC.
Further complicating the process, the threshold for the number of employees eligible for the full credit was increased from 100 to 500 for 2021, and a new provision was introduced allowing severely financially distressed employers to treat all wages as qualified wages if their gross receipts declined by more than 90%.
As of August 8, 2024, the IRS announced that it would begin processing 50,000 low-risk ERTC claims, with payments expected to start in September and continue in the following weeks. Claims filed between September 14, 2023, and January 31, 2024, will also be processed, focusing on both high- and low-risk claims. Businesses may receive payments for some tax periods while others are still under review.
If you need to make modifications to your ERTC application, on August 15th, the IRS opened a second ERTC Voluntary Disclosure Program. Applicants will have through November 22, 2024, to make changes to their applications allowing businesses a chance to correct improper payments at a 15% discount and avoid future audits, penalties and interest.
In conclusion, the delays in ERTC payments are due to a combination of high application volumes, complex eligibility criteria, legislative changes, and resource constraints. By understanding these challenges and taking proactive steps, golf course owners can better navigate the process and improve their chances of receiving their payments. For those working with Rockerbox, a partner of the NGCOA, it is reassuring to know that none of their client's claims have been disallowed to date, although some claims required resubmission due to updated IRS guidance. If you have questions about your claim, Rockerbox or your broker can provide assistance.