Loading
The federal Employee Retention Tax Credit program is more complicated than — and not nearly as well known — the Paycheck Protection Program. Yet the program, known as ERTC, can be a tremendous resource for businesses and nonprofits that didn’t lay off workers during the pandemic.
But just like with many other government programs, there's a ‘yeah but.’ Part of the $2.2 billion Coronavirus Aid, Relief, and Economic Security Act, the ERTC program, like PPP, has attracted its fair share of fraud — so much so that the IRS has issued multiple warnings about third-party bad actors and their “too good to be true” promises of financial windfalls, which are really deceptive pledges that can lead to audits, fines and other penalties.
Stepping into this murky market are a pair of Tampa entrepreneurs, Brian Anderson and John Souza. They've launched a new company, ERTC Express, and are determined to do things the right way.
Businesses are getting scammed by fly-by-night ERTC companies, Anderson says, partly because the program is much more complex than PPP. Determining eligibility requires a thorough examination of a firm’s financial structure that’s ideally done by a CPA.
“PPP was a one-page, easy form,” Anderson says. “ERTC is like a visit to the dentist's office, a root canal. We’re going through your financials, your quarterly payroll, for two years. The alternative was an easier route, and it was pretty clear on how much money you’d get, whereas with ERTC it was unclear. So everybody did PPP. And then, about a year later, March of 2021, Congress passed a revision to the CARES Act, and it modified who could get ERTC funds. It basically said, ‘You can now do both, as long as you didn’t double dip on the same payroll.’”
Employers can apply for ERTCs based on their financials from one or more of the following quarters: Q2, Q3 and Q4 of 2020, and Q1, Q2 and Q3 of 2021.
According to guidance from the U.S. Treasury Department, an employer must pass one of two tests to qualify for ERTC program funds: Either the employer’s business was fully or partially suspended by government order due to COVID-19 during the calendar quarter or the employer’s gross receipts were below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
Anderson and Souza, who’ve been friends for 20 years but come from different business backgrounds — Anderson in technology, Souza in investment banking — never formally worked together. They stumbled into their new venture almost by accident. Anderson, after hearing about the March 2021 revisions to the ERTC program, met with his CPA to check his company’s eligibility.
The CPA confirmed that, yes, Anderson would be eligible, but said he didn’t process ERTC applications.
“I called three or four other CPAs,” Anderson recalls. “None of them did it. I'm like, ‘This doesn't make sense.’ Almost immediately, the wheels started turning in my head.”
The duo launched ERTC Express in 2021. Today, the company has about 75 employees — including some based at satellite offices in Atlanta, Nashville and New York City — but Anderson and Souza say they have 100 open positions to fill.
“We’ve given up trying to do it ourselves,” Anderson says. “We’ve contracted with a recruiting firm here in Tampa to address that need.”
With the company being so new, Anderson and Souza declined to disclose ERTC Express’s revenue, but they say dollars and cents aren’t the primary goal at the stage they’re in.
“Nothing in our company is measured by revenue,” Souza says. “Everything is based upon how many entrepreneurs we help.”
Anderson adds, “We don't have revenue goals. But we're growing at a pretty good clip — we get hundreds of applications a day that come in from business owners around the country.”
The ERTC Express business model is set up in a way that allows companies to pay a service fee upfront or wait until they receive their money from the IRS. If they wait, the fee is “a little bit higher,” Souza says.
Part of ERTC Express’s hiring challenge stems from its desire to hire CPAs, unlike others in the industry out to make a quick buck before the ERTC program’s funding runs out and don’t care if their clients get audited.
If you’ve listened to the radio lately, you’ve probably heard about some companies doing this work. That’s because the airwaves are saturated with advertisements for companies making big claims about their ability to help small- and medium-sized businesses apply for ERTCs.
“When the grant runs out, which is in a little less than two years, what’s going to happen to those guys?” Souza says. “Ninety-nine percent of the companies out there that are doing radio and TV mass advertising will go away. That will be problematic … if you worked with that company and you get audited, there’s no audit defense. They’re gone. They’ve made their money. There’s no longevity because it was a pure cash grab.”
PPP was a one-page, easy form. ERTC is like a visit to the dentist's office, a root canal." –Brian Anderson, ERTC Express
These companies, according to Anderson and Souza, don’t bother to find out if clients are actually qualified to apply for ERTCs. They simply ask the applicant to sign a statement, otherwise known as a client attestation, affirming that they were negatively affected financially by the pandemic but chose not to make cuts to their workforce.
“They’re not basing it upon whether you’re qualified or not,” Souza says, “because you said you’re qualified.”
Client attestation is a massive exercise in cutting corners, he adds. ERTC qualification “is complex … typically, it takes our team about three weeks from start to finish. It’s almost like buying a house. It’s that same kind of process, and we don’t know until the end” whether a client is truly qualified.
Souza adds, “We might have a gut feeling that a business is likely eligible, but we don’t really know until the accounting team takes a look. They have to look at your profit and loss. They have to look at what your gross receipts were in 2019 vs. ’20 and ’21. Nobody can tell you that over the phone.”
The ERTC program is set to come to an end in April 2025. That leads to an obvious question: What will become of ERTC Express?
Anderson and Souza, unsurprisingly, have a definitive answer. They plan to evolve the company into a larger, more comprehensive platform for entrepreneurs.
“ERTC.com, when the grants go away, becomes Entrepreneurs Run the Country,” Souza says. “The plan is for Entrepreneurs Run the Country to be a mission-focused organization that will end up being, on an account basis, one of the largest entrepreneurial organizations in the U.S.”
Through its work with the federal ERTC program, ERTC Express has already established relationships with more than 30,000 businesses around the country, giving it a huge pool of potential clients for Entrepreneurs Run the Country. One of the services ERTC is already offering is facilitating funding advances to companies that seek to get that money quicker.
“How do you get a fast ERTC return, but not cut corners on eligibility?” Souza says. “Through this consortium of banks, we have access to about $400 million. We were able to build this model wherein someone comes in, and at the end [of the process], we can fund them sometimes as quick as 48 hours out of the gate, which blows away everybody in the marketplace. Because that's what entrepreneurs need. They don't need to get audited — they need their money, and they need it now. And they're willing to pay for it, but at a normal rate.”
(This story was updated to reflect ERTC's correct funding services.)
Your free article limit has been reached this month.
Subscribe now for unlimited digital access to our award-winning business news.
Join thousands of executives who rely on us for insights spanning Tampa Bay to Naples.
