Summary

Wipfli alerted two mid-sized manufacturing clients (sister companies) to the employee retention tax credit (ERC), helped them determine eligibility and managed their application. As a result, the companies received more than $650,000 in tax credits, providing much-needed cash flow during the COVID-19 pandemic.

Situation

Wipfli has provided tax consulting and financial advisory services to the two manufacturers for over 20 years. As COVID-19 relief funds became available, Wipfli reached out to the firm’s clients to keep them informed and provide application support.

Originally, the ERC was designed as an alternative to the PPP program, meaning companies were not eligible for both. But the second round of stimulus funds in December 2020 expanded the ERC program and allowed businesses that received PPP funds to claim the ERC retroactively for 2020.

Businesses qualified for the tax credit if they had to suspend business activity — even partially — due to a COVID-19-related government order. Businesses also qualified if closures or quarantines led to a 20% or more drop in revenue compared to the same quarter in 2019.

For eligible companies, the ERC can be worth up to $33,000 per employee. That includes one $5,000 claim per employee for 2020, and up to $7,000 per employee per quarter in 2021 for businesses still impacted by the pandemic.

Unlike the PPP loans, ERC has unlimited funding. Any qualifying business that applies can receive the credit. Businesses are not required to pay these tax credits back or track spending.

Strategy

Wipfli alerted the leadership team of the two manufacturing companies to the opportunity. Wipfli discussed with them how the companies had been impacted and analyzed financials to calculate that impact. While these manufacturers were only minimally impacted by closures and quarantines themselves, they were feeling the sting from closures up their supply chain.

A slowdown in materials had caused significant disruption to production schedules and delayed projects. That meant they were stretched thin and forced to lean on their line of credit to meet essential cash flow demands.

Wipfli was available to provide whatever level of support companies need in applying for the ERC. With multiple entities complicating the application process, these two clients opted to have Wipfli manage the entire application process.

Wipfli’s team:

• Calculated and documented the qualification rationale.
• Prepared and submitted the necessary forms.
• Helped these manufacturers receive their funds in a timely fashion.

Results

Due to the temporary material shortage, these manufacturers qualified for the ERC in Q1 2021. For that one quarter alone, the organization — which has a combined employee group of roughly 87 full-time employees — qualified for over $650,000 in tax credits. They received their funds within two months of application.