ERC in Ohio: Ultimate OH Employee Retention Credit Guide

Are you an Ohio-based small business owner grappling with the intricate process of claiming the Employee Retention Credit (ERC)?

While the national and state guidelines may be similar, the application process for the ERC in Ohio presents unique challenges, particularly with the IRS gearing up for audits.

But don't let this deter you. Our expert team at Brotman Law has curated a comprehensive guide that simplifies the fundamentals of how the ERC operates in Ohio.

But… if you’re just looking for guidance from our ERC attorneys, particularly if you need ERC audit help, check out our services by hitting the button below to see how we can help you.

Alternatively, read on to get a good grasp of the ERC process...

What is the ERC credit in Ohio?

The Ohio Employee Retention Credit (ERC) is a refundable tax incentive for businesses affected by COVID-19. This incentive covers 70% of wages paid between March 13 to December 31, 2021 up to $7,000 per employee/quarter and was designed so businesses could continue you to thrive post-pandemic.

For more information, we recommend checking out our comprehensive "what is ERC" guide.

Eligibility for the ERC in Ohio

Navigating the complex landscape of the ERC in Ohio hinges on a clear understanding of its eligibility criteria. Ohio business owners, including tax-exempt organizations, can qualify for this relief if they were operational during 2020 and experienced one or both of the following:

• Full or partial suspension of operations in any calendar quarter due to government-mandated restrictions on commerce, travel, or group gatherings in response to COVID-19.
• A substantial decline in gross receipts.

While the concept of business suspension is relatively straightforward, given the pandemic's extensive impact, accurately determining the drop in gross receipts is vital for businesses still grappling with financial instability. This calculation is key to ensuring compliance with the ERC requirements.

For more information, please check our detailed guide on ERC qualifications.

Calculating the OH ERC

Calculating the OH ERC requires precision, especially with the changes in ERC parameters from 2020 to 2021.

For the 2021 ERC calculation, businesses in Ohio must meet these requirements:

• Overcome financial difficulties.
• Have fewer than 500 employees.
• Identify qualifying wages.
• File tax returns punctually.

The maximum limit for ERC credits is set at $10,000 for each employee every quarter, offering a generous credit rate of 70%.

In the case of ERC in 2020, the same guidelines apply, albeit with a lower credit rate of 50%. However, businesses that had a workforce exceeding 100 employees in 2020 do not qualify.

Applying for the ERC in OH

As part of the application process for the ERC in OH, eligible employers in Ohio need to keep a thorough record of their total qualified wages and related health insurance costs on a quarterly basis, as reflected in their quarterly employment tax returns.

For most Ohio employers, the ERC application process starts with Form 941 for the second quarter. The ERC credit is designed to offset the employer's share of social security tax, and any excess amount is refundable through conventional procedures.

The provision for refundability serves as a substantial financial lifeline for Ohio-based businesses. These businesses, which have grappled with the severe economic shocks triggered by the COVID-19 pandemic, can find some relief through this measure.

PPP & the Ohio state employee retention credit

The Consolidated Appropriations Act introduced modifications to the initial conditions of Paycheck Protection Program (PPP) loans, with significant implications for businesses in Ohio:

The IRS issued a statement allowing deductions for qualifying expenses that could lead to loan forgiveness under the PPP.

This represents a shift from previous guidelines that denied deductions for eligible expenses, which are now considered outdated due to an amendment in the CARES Act. This amendment ensures that no deductions, tax attributes, or basis increases are denied because of income exclusion from forgiven loans.

If you operate a business within the borders of Ohio, you now have the opportunity to claim both the Ohio employee retention credit and PPP benefits concurrently.

However, it's crucial to navigate this process with caution. The combination of ERC PPP benefits may present potential pitfalls, necessitating careful consideration to avoid any complexities.

Nonprofits & the Ohio ERC 

The Ohio ERC also encompasses nonprofit organizations, including churches and similar entities, mirroring its application to standard small businesses. However, the eligibility criteria and rules can be somewhat intricate for nonprofits to navigate.

To be eligible, nonprofits must satisfy certain conditions like the government mandate test and gross receipts test.

The ERC for nonprofits is claimed through the submission of Form 941-X, with the amount declared on Form 990, with relevant deductions contingent upon the qualified wages and the employee count of the organization.

Does Ohio tax the employee retention credit?

Ohio doesn't tax the employee retention credit. While employee retention credits aren't not directly considered taxable income, they do influence payroll deductions and accurate reporting on tax forms like 1120-S and 1065, with the amount depending on payroll expense deductions taken during the year, and the type of business entity.

Answering the question of, "is ERC taxable income?" while is a simple "no" on the surface, it's not always that simple.

Audits and the Ohio employee retention credit deduction

Claiming the Ohio Employee Retention Credit deduction demands strict adherence to IRS guidelines to prevent complications.

While the IRS has the power to initiate an ERC audit, you can mitigate this risk and prepare for such an event:

• Implement proactive strategies to prevent IRS audits 
• Understand the statue of limitations for which ERC audits can occur
• Know exactly how to respond to an audit notice

By mastering the nuances of ERTC compliance and audits, you fortify your Ohio-based small business against potential pitfalls.

Scams relating to the Ohio employee retention grant

As businesses navigate the process for obtaining an Ohio employee retention grant, vigilance against employee retention credit scams is incredibly important.

The IRS has alerted businesses to these deceptive practices, highlighting the need for tax compliance and cautious engagement with third parties.

Beware of prevalent ERC scams such as:

• Identity Theft: They target ineligible businesses, steal confidential information, and fraudulently apply for credits.
• Unsolicited Phone Calls: Scammers falsely claim ERC eligibility, bypass official protocols, and overcharge for unneeded services.
• Unauthorized Collections: Fraudsters file ERC claims for businesses, pocketing a large portion of the credit.

To stave off ERC scams, businesses should:

• Verify eligibility and requirements.
• Collaborate with reputable tax professionals.
• Be wary of unsolicited guidance or unrealistic guarantees.
• Maintain direct communication with experts personally.

By taking these steps, you can easily defend your business against fraud, ensure compliance, and avoid falling prey to these scams.

How Brotman Law can help

At Brotman Law, we understand the complexities of tax compliance and the risks of ERC scams. Our team of experienced tax professionals is here to guide you through the process, ensuring your business remains protected.

Don't navigate this uncertain terrain alone. Reach out to Brotman Law today and empower your business with a trusted ERC Tax attorney. Your journey through the ERC process isn't just important to us, it's our top priority.

Final points

The Employee Retention Tax Credit (ERTC) offers a considerable financial lifeline to businesses and nonprofits impacted by the COVID-19 pandemic. However, the complexity of eligibility criteria and qualified wage calculations can be challenging, particularly when considering variations in employer size.

Unfortunately, this period of uncertainty has also seen a rise in scams exploiting these complexities, targeting vulnerable parties seeking financial relief. To navigate through this intricate landscape, it is crucial to engage with trusted tax professionals.

Remember, we're here at Brotman Law to support you every step of the way. Reach out to us today to ensure you're making informed decisions and taking full advantage of all available opportunities.

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