Work Opportunity Tax Credit (WOTC) Service

Some WOTC Statistics

The Work Opportunity Tax Credit is available throughout the United States, and in 2022 it was worth approximately $5 Billion dollars to employers. 2,569,056 total Work Opportunity Tax Credits were issued in the United States in 2022. WOTC was renewed for five years, and is currently active through 12/31/2025.

Since it was introduced in 2017, the Long Term Unemployment category has never reached over 4.67% of the total. Until 2021 that is. At 410,015 certifications, it's now more than 4 times higher than 2019.

One study by the RAND Corporation, looking specifically at qualified veterans, found that the WOTC increased their employment rates by 1.8 percentage points and their wage income by 39.9 percent.

Participating in WOTC can drive financial savings to an organization, and studies by Peter Cappelli, Wharton School professor and economic researcher, indicates that it is among the most successful labor market policies enacted by Congress.

Although the actual value of the issued tax credits would actually vary based on hours worked, and category the employee came in under, we are using the average tax credit value of $2,400. This would give us a potential total value of 2022's tax credits at up to an impressive $6.1 Billion.

Originally introduced as a temporary measure by Section 1201 of the Small Business Job Protection Act of 1996 (P.L. 104-188). The Consolidated Appropriations Act, 2021 (Section 113 of Division EE P.L. 116-260) authorized the extension of the WOTC until December 31, 2025. It allowed for-profit employers to claim a tax credit against their federal income tax liabilities for hiring members of seven specifically designated groups. It has remained part of the tax code ever since benefiting thousands of companies in diverse industries. Yet, many more do not take advantage of the credit’s potentially significant benefits.

The Work Opportunity Tax Credit (WOTC) is a federal tax credit program created to provide an incentive for businesses to facilitate access to employment for American workers, especially those from disadvantaged groups. The program benefits employers as well as employees – offering enhanced job opportunities to disadvantaged employment candidates and providing significant financial savings to the employer, which can be used for further candidate outreach, to offset training costs or other business needs. It is surprising that, decades after the program’s introduction and with so many clear signs of its efficiency, many employers are still hesitant to fully explore the WOTC program and continue to question its benefits. There are many reasons why it is a good time to start pursuing the Work Opportunity Tax Credit and stop leaving the free money on the table.

How does the Work Opportunity Tax Credit (WOTC) work?

Depending on eligibility category, hours worked, and wages paid, an employer can secure a tax credit of up to $9,600 per hire. Whether you are a small or medium-sized business or an industry giant, this amount in credit savings is bound to make a difference and greatly impact a company’s financial situation. In today’s business environment, companies of all sizes are looking for ways to save money and improve the bottom line, and WOTC can provide immediate returns.

The Work Opportunity Tax Credit program is designed to enhance employment opportunities for individuals who have a more difficult time finding and maintaining employment. Accordingly, companies participating in this program are fulfilling the intent and desire of Congress and the DOL with this job program, and driving significant savings back to their shareholders.

Work Opportunity Tax Credit certification and screening process

Before employers can claim a Work Opportunity Tax Credit, they must first receive certification from a State Workforce Agency (SWA) that the new hire meets the qualifications of one of the target groups. This is done using IRS Form 8850 and one of two forms from the Department of Labor.

The first, ETA Form 9061, or the Individual Characteristics Form (ICF), provides specific information about how an applicant answered the WOTC questionnaire. The second, ETA Form 9062, is the Conditional Certification Form for applicants who have been pre-screened for WOTC by an SWA. Both forms must accompany Form 8850 submissions.

Form 8850

Employers have 28 days from a qualified employee’s start date to send Form 8850, also known as the Pre-Screening Notice and Certification Request for the WOTC, to the applicable SWA. The first page, which needs to be completed by the applicant on or before the day of the job offer, outlines the conditions that someone from one of the target groups must meet to qualify for the program. The second page is intended for employers. On it, they will provide their business contact information and the applicant’s key employment-related dates.

Work Opportunity Tax Credit questionnaire

Page one of Form 8850 is the WOTC questionnaire. It asks the applicant about any military service, participation in government assistance programs, recent unemployment and other targeted questions.

Who qualifies for the Work Opportunity Tax Credit?

Employers may qualify for the WOTC if they hire an individual who is a member of one of the target groups determined by the IRS to have historically faced barriers to employment.

Employees eligible under the Work Opportunity Tax Credit program

The following groups are considered target groups under the WOTC program:

Qualified short-term and long-term IV-A recipients (Temporary Assistance for Needy Families) ("TANF")
Qualified Veterans ("QV")
Ex-felons ("EF")
Designated Community Residents ("DCR")
Vocational Rehabilitation Referrals ("VRR")
Summer Youth Employees ("SYE")
Supplemental Nutrition Assistance Program (SNAP) recipients ("SNAP or Food Stamps")
Supplemental Security Income (SSI) Recipients ("SSI"
Long Term Family Assistance Recipients ("Long-Term TANF")
Qualified Long-Term Unemployment Recipients ("QLTU")

Employees not eligible under the Work Opportunity Tax Credit program

Some exclusions apply to the list of WOTC target groups. Employers who rehire a former employee, a family member or dependent, or someone who will be a majority owner in the business may not be able to claim the tax credit for that individual (even if the individual is otherwise a member of an eligible target group).

Businesses eligible for the Work Opportunity Tax Credit

Any business, regardless of size or industry, may be eligible to claim tax credits under the WOTC program. And because there’s no limit to the number of individuals employers can hire as part of the program, there’s also no cap on the amount of credits that they can claim.

How do employers claim the Work Opportunity Tax Credit?

1. Find eligible applicants
Contact the SWA or local unemployment office for a list of potential job applicants.

2. Screen applicants
Have applicants complete the questionnaire on the first page of Form 8850 on or before the job offer date to see if they qualify for one of the WOTC target groups.

3. File documents
Submit the completed Form 8850 and either ETA Form 9061 or 9062 to the SWA within 28 days of the eligible new hire’s start date.

4. Monitor hours worked and qualified wages paid
WOTC-certified employees must work at least 120 hours during the first year of employment for an employer to claim credits, which are calculated as a percentage of qualified wages. Employees in the TANF recipient category must work 400 hours.

5. Claim the tax credit
Use IRS Form 5884 when filing annual tax returns to claim the WOTC.

6. Keep accurate records
Make copies of all the forms and supporting documents submitted to SWAs and correctly track employee hours in case the IRS decides to audit the credits claimed.

Benefits of outsourcing tax credits and business incentives administration

Both newly eligible business that haven’t yet taken advantage of tax credits and those that already have a large tax credit portfolio may benefit from outsourcing tax credits. It can help them:

Identify and evaluate new opportunities for which they may be eligible
Maintain accurate records so they can make informed decisions backed by data
Stay compliant with changing tax credit laws and avoid penalties
Report tax credit activities and meet deadlines.

Screening for WOTC Eligibility Without the Hassle

Another reason employers often cite explaining their reluctance to utilize this program is the perception of it being overly burdensome and requiring an onerous amount of administration. There are also worries that candidates may not be comfortable providing information about their potential eligibility for the program.

When it comes to WOTC, the questions to screen candidates can be incorporated into the hiring process in a streamlined way, with the required government forms generated automatically incorporating the responses. In this manner, the process becomes much more efficient and does not require intervention or assistance from the company’s hiring team.

The Department of Labor (DOL) has also specifically provided guidance that participating in WOTC screening does not violate discriminatory hiring laws. Because WOTC-eligible candidates often know there is an incentive to businesses for hiring them, and because more and more companies are participating in the program, there is a lower rate of opt-out by candidates. Prospective employees are becoming more comfortable at responding to the WOTC screening questions.

To ensure you don’t miss potential Work Opportunity Tax Credits (WOTC) for your new hires and reduce the burden of implementation, we have partnered with ADP

ADP SmartCompliance for tax credits works seamlessly with your recruiting and hiring software to provide an automated WOTC screening experience. Our best-in-class solution can:

Integrate with virtually any applicant-tracking solution (ATS): ADP’s WOTC screening solution integrates with your existing ATS, maximizing applicant data capture.
Maximize your tax credit eligibility: Our single-page questionnaire and intuitive web and mobile app increase application rates and simplify the capture of required WOTC data.
Optimize results with financial insights: ADP's benchmarking, analytics and intelligent forecasting tools help maximize results and avoid financial surprises.
Provide a touchless HR experience: A secure yet easy fit within your hiring process that minimizes work for hiring managers.
Stay up to date: The recent IRS Update IR-2022-159 may impact your WOTC compliance practices.
ADP can help. Visit the ADP WOTC Resource Site for the latest details.
Simplify WOTC screening
Southern Healthcare Management saved time by switching from a manual WOTC screening process to ADP's automated solution.

How far back can you claim WOTC tax credits?

Businesses can claim the WOTC credit retroactively by filing amended returns for any open tax years, which in most cases, is three years. The time frame may be longer, however, if the organization endured losses during that period.

Is WOTC tax credit taxable income?

The WOTC credit reduces federal taxable income, meaning that businesses receive a dollar-for-dollar tax credit and still get to deduct expenses related to employment.

Do WOTC tax credits expire?

The current WOTC legislation has been authorized through December 2025, and will likely be extended beyond then given the strong bi-partisan support for the program. Given the financial returns, the ease with which companies can pursue WOTC, and the societal benefits of the program, businesses who are not participating in the program should strongly consider implementing a process to do so.

The administrative challenges, including meeting statutory requirements, filing the required forms and calculating the credit pursuant to the IRS Code, can be readily overcome.

Outsourcing tax credit management to a reliable partner is the safest way to simplify the complex WOTC program application process, eliminate several time-consuming steps, and meet all statutory requirements successfully.

Note: The Refund statute is three years, meaning a company typically has three years (four for may state refunds) before the statute on the refund expires. After that, that's it-- You walked away from the refund forever!

The WOTC Credit is currently also available through state and US Territory programs in the following states and territories:

Alabama
Alaska
Arizona
Arkansas
California
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
US Virgin Islands
Virginia
Washington
West Virginia
Wisconsin
Wyoming

What sectors does WOTC occur in the most?

Employers of all sizes are eligible to claim the WOTC. This includes both taxable and certain tax-exempt employers located in the United States and in certain U.S. territories.

How do you calculate the R&D tax credit using the alternative simplified credit method?

In general, the WOTC is equal to 25% of up to $9,600 (depending on the targeted group) of wages paid for those employed at least 120 hours but fewer than 400 hours and 40% of up to $6,000 for those employed 400 hours or more, or incurred on behalf of, an individual who:

is in their first year of employment;
is certified as being a member of a targeted group; and.
performs at least 400 hours of services for that employer.

How much businesses can save

The credit amount for WOTC can be up to $9,600 for each qualified new hire, depending upon the new hires' WOTC target group. The credit is equal to a percentage of the eligible employee’s wages, and the employee must work at least 120 hours for the employer to receive credit.

WOTC Target Groups

The new employee must belong to one of the following WOTC target groups:

VETERAN TARGET GROUPS MAX CREDIT

Veterans with a service-connected disability who have been unemployed for at least 6 months in the past year $9,600

Veterans with a service-connected disability and hired within 1 year of their discharge/release date $4,800

Veterans who have been unemployed for at least 6 months $5,600

Veterans receiving Supplemental Nutrition Assistance Program (SNAP) benefits $2,400

Veterans who have been unemployed for at least 4 weeks but less than 6 months $2,400

NON-VETERAN TARGET GROUPS MAX CREDIT

Long-term unemployed $2,400

SNAP recipients $2,400

Temporary Assistance for Needy Families (TANF) recipients $2,400

Long-Term Family Assistance recipients who are members of a family that has received TANF benefits

for at least 18 consecutive months $9,000

Supplemental Security Income recipients $2,400

Vocational rehabilitation referrals $2,400

Ex-felons $2,400

Designated community residents $2,400

Summer Youth program participants who are 16 to 17 years old, work between May 1 and September 15,

and live in a designated community area $1,200

When to claim the credit

Employers claim the tax credit against federal taxable income for the year that they “realize” the credit, that is, the year that the credit was awarded, not the year that the employee was hired.

WOTC is non-refundable, meaning the business must have a tax liability against which to use the credit.

Unused credit can be carried back one year and carried forward for 20 years.

How to claim the credit

Employee must complete IRS Form 8850 on or before starting the job.

Form 8850 must be postmarked within 28 days of start date and sent to the state Department of Labor for certification.

The above example highly oversimplifies the calculation and the process of claiming the credit.

How can Legacy Tax & Resolution Service (LTRS) help determine WOTC tax credit eligibility and filing?

With an unmatched combination of tax credit experience, technology and resources, LTRS makes claiming WOTC tax credits as simple, streamlined and predictable as possible. We assist CPAs and their clients with financial inquiries and help them strategize the most effective ways to utilize tax credits. In addition, LTRS continuously monitors for changes in legislation and compliance requirements at the federal, state and local levels that may affect tax credits.

Who We Help

Put the Work Opportunity Tax Credit program to work for your business, your clients, or your customers.

WOTC Tax Credit Services for CPA Firms & Tax Professionals

Include WOTC tax credit services in your client offerings to minimize tax risk and increase profit margins

Protect Your Clients' Bottom Line

Extend your service offerings beyond traditional CPA and tax firm capabilities to help your clients optimize return on investment

WOTC Tax Credit Services for Financial Service Firms

Big picture tax and financial insight that maintains compliance and drives business value

Increase Working Capital

Leverage Legacy's Consulting's team of innovation tax professionals to develop customized solutions for clients that help them achieve their financial and professional goals.

WOTC Tax Credit Services for Business Owners

Protect your profits and drive cash flow to your bottom line

Maximize Business ROI

Tap into the dollar-for-dollar savings power offered by the Work Opportunity Tax Credit to optimize your return on overall investment

WHY LEGACY TAX & RESOLUTION SERVICES?

Dedicated To WOTC

No need to be the guinea pig for your CPA or other tax professional. We average 10-20% more funding than a CPA or other tax professional, not familiar with the nuances of the WOTC program.

WOTC Program Specialists

Our team WOTC Department strictly focuses on WOTC, allowing us to be the experts and resulting in more funding for your business. This includes the supporting calculations and documentation required to be submitted with each application to the IRS. See below what makes our application package different.

Audit Protection Included

If you get audited, we will supply all criteria and assist in responding to the IRS.

Lightning Fast Results

Our proprietary process allows for faster results, which means faster funding. We have perfected the communication process with our stakeholders to work a case from initial submission through application submission with the IRS.

Maximum Funding

We evaluate your claim in every way possible to ensure we maximize your credit.

Professional Support

Although our process is quick and painless, we have answers with a dedicated team of WOTC support specialists when you have questions.

What Your Business Can Expect, Using Our Services to Process Your WOTC Application

Because of the aggressive and inaccurate claims made by "WOTC Mills," the IRS has issued several warnings about ensuring that your WOTC credits can be verified. The IRS demands detailed documentation and proof of compliance, including tax aggregation and attribution rules. Businesses and organizations must know the issues and take the necessary precautions to ensure their WOTC claims are valid.

With so much on the line, attempting to complete a fully supported application on your own can be overwhelming. That's where Legacy Tax & Resolution Services comes in. Our experts help you navigate the complex world of Work Opportunity Tax Credits and deliver audit-ready reports that will give you confidence in your WOTC Credit Application. Regarding the WOTC Application Package submitted to the IRS, we believe in providing a package that will make the job of reviewing your case and reaching an approval decision by the IRS Agent fast and efficient. By providing an audit-ready WOTC application, we accomplish three objects, 1) Because your application has been pre-audited, the application is ready for a quicker approval by the IRS reviewer 2) Your chances of being selected for a post-approval audit is considerably reduced because of our pre-audit process, 3) While no company can completely prevent a random audit, should you be selected, you know that your company is ready.

Below is what we provide

Audit Ready Report with Submission – Our Research Team builds a solid qualification case for every client. They create timelines and arguments to prove your qualifications for the WOTC. Our audit-ready reports include all of the memos, write-ups, qualification summaries, and employee support necessary to assist the IRS agent in verifying your WOTC claim and sustaining your claim in the event of an audit.
Qualification Criteria – Exactly how the business qualifies (Targeted Group) is laid out in considerable detail as if we were preparing for an audit.
How Statutory Requirements Were Addressed – Taking into consideration Tax Aggregation and Attribution rules
Qualified Wage Details – Break down payroll information by employee per quarter, including eliminating any majority owners and those related to the majority owner by Attribution Rules. Take into consideration the employer size test and the allowable qualifying wages.
Qualification Test- We spend an extensive amount of time gathering information from the client to provide a pre-audit application package for submission to the IRS.

Preparation of Forms

The WOTC tax claim needs to be submitted along with your annual entity or personal tax filing. Here is what you need to file:

Form 5884, Work Opportunity Credit.
Form 3800, General Business Credit. This form has a line that asks for the amount of Credit for Work Opportunity Credit.
Each state will have its own form if it offers a state Work Opportunity tax credit program. If you qualify for the payroll tax offset, you will need to make sure you account for it on Form 941, Employer’s Quarterly Federal Tax Return. You will also need to fill out and attach Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities.
Documentation requirements as stated in I.R.C. § 51
Accurate and supportable numbers allow you to claim the tax credits you are eligible for confidently.

How complicated is the WOTC?

The difficulty is in meeting the deadline requirements. Before employers can claim a Work Opportunity Tax Credit, they must first receive certification from a State Workforce Agency (SWA) that the new hire meets the qualifications of one of the target groups. This is done using IRS Form 8850 and one of two forms from the Department of Labor.

Form 8850

Employers have 28 days from a qualified employee’s start date to send Form 8850, also known as the Pre-Screening Notice and Certification Request for the WOTC, to the applicable SWA. The first page, which needs to be completed by the applicant on or before the day of the job offer, outlines the conditions that someone from one of the target groups must meet to qualify for the program. The second page is intended for employers. On it, they will provide their business contact information and the applicant’s key employment-related dates.

Wow this is way to complicated for me to try on my own

We’ve Cut Through the WOTC Tax Credit Confusion for You

If you tried researching the Work Opportunity Credit program, or even tried to do this yourself you are fully aware of the confusions and complexities.

Much of the WOTC information found on page 1 of Google may already be outdated by the time you read it.

Yeah, This is way too complicated to try on my own!

WOW! Still not convinced you should not try this on your own. Well then, let's try to get you prepared as MUCH AS POSSIBLE!

Quick WOTC Checklist

1. Find eligible applicants
Contact the SWA or local unemployment office for a list of potential job applicants.

2. Screen applicants
Have applicants complete the questionnaire on the first page of Form 8850 on or before the job offer date to see if they qualify for one of the WOTC target groups.

3. File documents
Submit the completed Form 8850 and either ETA Form 9061 or 9062 to the SWA within 28 days of the eligible new hire’s start date.

5. Claim the tax credit
Use IRS Form 5884 when filing annual tax returns to claim the WOTC.

6. Keep accurate records
Make copies of all the forms and supporting documents submitted to SWAs and correctly track employee hours in case the IRS decides to audit the credits claimed.

Pointers and Pitfalls

The following will help clarify or avoid pitfalls within the ERC regulations.

ERC legislation allows an employer to take an ERC on the healthcare costs for a furloughed employee, even if they are not collecting wages.
There is complexity in defining “partial” business, or commercial, interruption.
Be careful. There’s room for interpretive trouble when it comes to counting full-time workers. The legislation refers to full-time staff and points to prior language indicating that full-time employees are those who worked 30 hours a week or more on average in 2019.
Zooming or other telecommuting can rule out qualifying wages. If everyone goes home and promptly telecommutes, even if there’s a government stay-at-home order, the business has not been disrupted.
The CAA eliminated, at least for now, the requirement that eligible wages for an employee not be higher than they were in a prior quarter.
Owner wages, and any owner family wages, may have to be excluded in calculating eligible wages.
The ERC program was eliminated for the 4th quarter of 2021 to help fund infrastructure legislation.

If you had any of these issue, you owe it to yourself and your business to find out if you qualify.

How You May be Eligible for the WOTC credit even for back years!

No Signiﬁcant Decline in Gross Receipts?

You can still qualify. The “full or partial suspension of operations” (or “FPSO”) test is not a ﬁnancial statement test. Therefore, a business is not required to have any decline in gross receipts to evidence the existence of a FPSO. Congress created this test recognizing that: (1) gross receipts do not always tell the full picture of a business’ COVID hardship; and (2) even proﬁtable businesses may have had to make tough employee retention decisions due to COVID-19-related changes to their business. For example, a company may be successful in one line of business and not another, causing total revenue to increase while certain business lines suﬀer or diminish. The ERC was designed to encourage the retention of employees in both proﬁtable and non-proﬁtable businesses.

Deemed an Essential Business?

No problem. The Internal Revenue Service (“IRS”) explicitly states that an essential business may be eligible under the FPSO test. The FPSO test looks for a full or partial suspension of business operations. Hence, a full closure or shutdown is not required.

Not Materially Impacted by Government Orders?

That’s OK. The IRS carefully chose the words “more than nominal” to identify a situation where operational modiﬁcations and restrictions could result in a FPSO. The IRS did not use “substantial,” “material,” or other similar thresholds which may have suggested that a major impact be identiﬁed. Therefore, operational disruptions that are slightly more
than inconsequential may substantiate ERC eligibility.

Segmentation to Qualify!

To further complicate the matter, the IRS allows employers considering the ERC to ﬁrst break their business into diﬀerent “segments” (...think locations, divisions, services lines, business units, etc.) and then asks whether any segment of the business experienced a FPSO. If one of the company’s “segments” experienced a FPSO, a FPSO is deemed to have existed for the entire business, so long as such segment accounted for more than 10% of the revenue or service hours of the entire business in 2019.

One of the most important things to remember is that it is generally never just one operational modiﬁcation or restriction that is used to support a FPSO; oftentimes, it’s the accumulation of several diﬀerent operational restrictions or adjustments which, on their face, might seem inconsequential but in the aggregate constitute a FPSO.

Research & Development Credit (R & D) Spotlight:

1. Reduction In Revenue

The ERC allows qualified employers to recover wages and health plan expenses incurred during COVID-19.

• For 2020 periods, businesses can recover 50% of qualified costs, up to $5,000 per employee
• For 2021 periods, businesses can recover 70% of qualified costs, up to $7,000 per employee, per quarter for the first three quarters.

Employers are eligible to claim up to:

$26,000 per employee

Many taxpayers do not realize that Congress passed legislation at the end of 2020 allowing taxpayers to claim the ERC even if they took the PPP loan. This was not previously permitted.

With over 100 pages of ERC statute and regulation, and the credit now in its third iteration, the ERC can present challenges. Legacy Tax & Resolution Services will help you navigate this incentive for both future quarters and retroactively.

2. Impacted by Government Orders (include supplier chain disruptions)

If a governmental order had more than a nominal impact on your business operations, such as:

Fully or partially suspension of operations tied to governmental orders
Inability to obtain critical goods or materials from supplies because they were required to suspend operations due to governmental orders
Limiting occupancy to provide for social distancing due to governmental orders
Governmental orders to shelter in place preventing employees from going to work.

3. Recovery Startup Program

Companies founded after February 15th, 2020, are likely eligible for a special form of employee retention tax credits (ERC or ERTC’s). These businesses are called “Recovery Startup Businesses’’ in the context of employee retention tax credits.

Now that’s a mouthful, but it’s actually really important for your startup, especially if your company was incorporated or founded after February 15th, 2020. The American Rescue Plan Act of 2021, acknowledges that starting a company during COVID was difficult, and this attempts to help those companies with their cash flow. Specially, the government will give “recovery startups” tax credits to help them hire by making hiring new people cheaper.

Qualification tests for recovery startups and employee retention tax credits

There are a couple tests to make sure that your startup is eligible as a recovery startup for these ERC.

The first one was the business started on or after February 15th, 2020. Basically when COVID hit the United States.
The second one is the company must have had an average of $1 million or less in gross receipts every year.

If your company was started in 2020 and you are filing for this in 2021, you’re basically just looking at the 2020 year. Did your company do less than a million dollars in gross receipts / revenue in 2020?

How much can a recovery startup get with the ERC?

So the good news here is your startup can save basically $7,000 per employee on a tax credit, assuming they pay at least $10,000 or more to that employee in the eligible time periods.

It’s capped at $50,000 per quarter. So $50,000 in Q3,2021 $50,000 in Q4, 2021.

How To Qualify for ERTC?

Legacy Tax & Resolution Services (LTRS) Founder, Stephan H. Brewer, CPA, CTRS, JSM Tax, NTPI Fellow provides a brief video overview of the employee retention tax credit and its benefits. LTRS can easily check for its customers whether their business is eligible for ERTC. During the pandemic:

Were operations partially or fully suspended under government orders due to COVID-19?
Did your business experience a decline in percentage of gross receipts?
Are you a Recovery Startup Business that began after Feb. 15, 2020?

Qualified Wages

For quarters in 2020, employers with fewer than 100 employees can receive credits for 50% of wages paid to all employees plus 100% of the cost of employer‐provided health care (subject to per‐employee cap).

For quarters in 2021, employers with fewer than 500 employees can receive credits for 70% of wages paid to all employees, plus 70% of the cost of employer‐provided health care (subject to per‐employee cap).

For both years, employers can’t claim ERTCs for wages that were used in calculating PPP loan forgiveness.

PreAudited For Your Protection

Our process is why we are different from the other R &D processing services. Every single case that we process is "PreAudited." This means we use the same process that an IRS auditor would use to verify your qualifications for the R & D credit. The IRS R & D Processing Unit only has a limited time to work on each case. They do not have the time for an extensive validation process. While that may be good for your business on the front end, it could be a massive disaster if your business is audited in the future and found not to qualify or qualify for a lesser amount. This could lead to huge penalties and perhaps even a referral to the Criminal Investigation Unit. This is why for every client we process, we PreAudit Every Case. If you are working with a process service that does not have this level of service, We believe you may have a potential huge future liability and not even know it. Processing Services that get paid a commission based on the refund size are incentivized to perhaps overlook things or not verify qualification. And if they are not licensed, wow, you are really taking your chances.

How do you know there are going to be a high number of future R &D Audits?

When firms start advertising R &D Audit Representation Services (ourselves included) the writing is on the wall. Get ahead of this by only working with a firm that PreAudits your R & D Application. If your firm did not conduct a PreAudit as part of the application process, consider having us conduct an R & D Risk Assessment. The best time to start preparing for an R & D audit is before you receive any notiication from the IRS. If you suspect that you may have been misled by a bad actor R & D provider into claiming credits you were not eligible for, the best thing you can do is seek a second opinion from a professional regarding your eligibility and have an R & D risk assessment conducted.

Here's How We Can Work Together

Flexible Options in Working With You or Your Team

There are several flexible options to work with you. The most popular is the Done-For-You (DFY), where we handle everything for you from start to finish.

Done-For-You (DFY)

We handle it all, from start to finish – MOST POPULAR OPTION.

Do-It-Yourself (DIY)

Have us review your work. We will analyze to determine where your package is lacking, needs correction, or lacks support. If you have already submitted your application, we will tell you if you have cause for concern.

Done-With-You (DWY)

Let's collaborate.

Consult-With-You

Customize to your exact needs.

Legacy Tax & Resolution Services DONE FOR YOU (DFY) R&D Service

Legacy Tax & Resolution Services R&D Service can help businesses retroactively claim the Research and Development Tax Credit. Your business will receive the following:

A specially trained R&D expert to review your qualifications
A report providing complete documentation of all calculations
Preparation all required forms

Here's How We Can Work Together. We break our processes down by the number of employees that you have (1-50 employees and 51- 500+ employees)

Do You Have 1 to 50 Employees?

$0 for the Initial Analysis Fee

To dive in and run the numbers

Analysis Fee Upon Engage

We present your refund amount and quote you a Flat-Fee based on the number of qualifying quarters and the number of employees. We charge a refundable fee of $2,500, applied toward the remaining balance upon receiving your refund.

Balance of Fees Upon Refund

The balance of the fees is due within 7 days of receiving your ERC refund check.

In this case, there is no initial fee or risk to you for us to get started and dive in and run the numbers, even though there is still a lot of work on our end.

We'll have an initial conversation with you and ask specific questions to ensure your business qualifies under the revenue test. Before this initial conversation, you will have been sent an initial survey to assist with your initial qualification conversation.

We'll send you client requests for documents needed to support your application thoroughly. We will also ask that you complete and sign an IRS Form 8821- Tax Information Authorization that will be used to track your case with the IRS.

It should take you about 10 minutes to gather and upload the required documents via our secure portal,

Our Tax Advisors will methodically determine your eligibility quarter-by-quarter for 2020 and 2021,

Then run the payroll calculations employee-by-employee for eligible Qualified Wages.

We will subtract out any PPP loans, R &D Credits, Work Opportunity Tax Credits (WOTC), Families First CoronaVirus Response Act (FFCRA) Credits, Shutter Venue Operators Grant (SVOG), Restaurant Revitalization Fund (RRF), and other tax benefit programs you may have received from your qualifying wages. Next, we will remove any disqualifying owners and family members from employee-qualified wages, and the final maximum ERC Refund will be determined.

These numbers are checked 3x's by 3 separate Tax Advisors to ensure we have the correct and maximum ERC Refund you qualify for.

Our application packages are by-the-book and per current IRS rules and guidelines. We literally PreAudit every case and provide well-documented support for every application.

At this stage, we review your ERC Refund amount with you; that is where you can decide if you want us to proceed.

We'll quote you a reasonable flat fee amount to finalize everything. Our fee is based on the number of qualifying quarters and the number of qualifying employees.

Most clients say YES at this point because we have already put in a lot of work, and our flat fee to proceed ahead to finalize your ERC Claim is less than what most professional ERC processing firms charge.

Then, we take all the work done up to that point and prepare and fill out the correct amended tax return forms to claim the ERC credit and provide the proper support documentation to support your claim.

These amended returns are called IRS Form 941-Xs, which must be filed for each quarter your business qualifies for. Form 941 is what your company already filed each quarter for payroll, and the 941-X is an amendment to those prior returns.

We will send the final amended Form 941s for your signature and return to our office. Once we receive the signed Form 941-Xs, we will mate these to the supporting package and forward the entire application to the IRS with tracking.

We will use Form 8821- Tax Information Authorization obtained from you as part of our information gathering to track your case with the IRS.

Upon the IRS' completion of the review of your case, your business will receive a check directly from the IRS for your ERC Refund.

The balance of the fees will be due within 7 days of receiving your ERC refund check.

Do You Have 50 to 500+ Employees?

$2,500 fee for the analysis

We charge a refundable fee of $2,500, applied toward the remaining balance upon receiving your refund, to dive in and run the numbers.

Balance of Fees Upon Refund

The balance of the fees is due within 7 days of receiving your refund check.

This is how we engage because there's much more upfront work for companies with more than 50 employees.

The process is the same as listed above, with the only difference being to charge $2,500 to perform the analysis.

We run through the same systematic in-depth process.

To start the analysis, you would be charged an upfront fee of $2,500.

Our Process Steps

Initial Consultation

It all starts with an initial consultation to make sure you qualify for the R & D program.

Checklist

Since we have determined in our initial consultation that you qualify, we will email a simple checklist of documents needed

Upload Documents

It will take you about 10 minutes to gather these documents and upload them to your secure portal. We take security very seriously. The details and the bulk of the time will be spent completing the narrative for the 4-part qualification test. This is where the majority of the time will be spent in creating the supporting documentation. We will provide very detailed and instructive questions and examples as part of our survey to full support the 4-parts test as part of supporting document for your application. Once the package is complete, if your are audited, your can feel comfortable knowing your are ready!

Deep-Dive Analysis to Verify Eligibility, Run Calculation and Determine Maximum R & D Refund

Once we get all of the documents, our Tax Advisory Team will analyze your expenses.

We will then analysis your responses to our extensive surveys to support the 4-part test.

Everything we do is thorough and accurate to help you maximize the total R & D Refund you’re legally allowed by the IRS based on your documentation.

Please Note: This is a very simplified description of the process and workflow. However, there are many complex details, IRS rules and regulations, and unique circumstances that determine your company eligibility and total R & D Refund amount. There are some businesses that may not qualify for the Research and Development Tax Credit program after going through this deep-dive process.

Quickly Provide a Preliminary Report

We provide you with a quick preliminary report of the opportunities and then dive in to the details

Analyze The Data

Our experts review your business activities ensuring that all credits and incentive requirements are satisfied, and the appropriate opportunities are identified

Document Credits

Our audit ready final report includes the supporting documents necessary to claim and support each credit or incentive requested

Secure the benefits

We provide your company all the necessary forms and instructions necessary to claim the credits and incentive due to your company.

Monitor the Process Until the Check Is In Your Hands

Through an IRS Power of Attorney we will monitor the progress until the check is in your hands

FAQS

See how do Businesses received the credit

Our Research & Development Tax Credit FAQs

IRS' Employee Retention Tax Credit FAQs

Myths About ERC

Do the Owner's Wages and Those Related to the Owner Qualify For The Employee Retention Credit?