Claiming the ERC in Indiana might seem straightforward, especially given the consistent guidance at national and state levels. However, don't be misled — the path to securing the employee retention credit in Indiana comes with its own challenges.
Small businesses in Indiana face an added layer of pressure due to the impending audits confirmed by the Internal Revenue Service (IRS).
But, here's the silver lining — it's not all challenges and obstacles. And we’re here to help you through it.
If you just need guidance from expert ERC attorneys, particularly if you need ERC audit help, we have dedicated ERC services for you. Hit the button below!
However, if you’d like a general overview first, carry on with this guide…
What is the ERC tax credit in Indiana?
The ERC tax credit in India means eligible businesses in the Hoosier State can claim 70% of qualified wages paid to employees between March 13, 2020, and December 31, 2021. It ensures financial stability and workforce protection, with a cap of $7,000 per employee per quarter.
The remainder of this Indiana guide will walk you comprehensively through everything related to Indiana's ERC. Alternatively, you can also turn to our overarching guide explaining “what is ERC”.
Eligibility for the new employee retention credit in Indiana
Employers, including tax-exempt organizations, can qualify for the new employee retention credit in Indiana when they conduct a trade or business in the calendar year 2020 and come across either of the following circumstances:
- Facing a complete or partial suspension in the operation of their trade or business during any calendar quarter due to COVID-19 related governmental orders that placed limitations on commerce, travel, or gatherings.
- Experiencing a significant decline in gross receipts."
The concept of a full or partial business suspension is relatively straightforward. Many companies had to halt their operations, and regrettably, some are still grappling with this financial uncertainty in Indiana.
For businesses that operated at a loss, it's important to calculate total gross receipts to ensure you meet the ERC qualifications.
Calculating the ERC in Indianapolis (& other IN cities)
The ERC calculation takes on both a straightforward and intricate angle, and precision holds immense importance to prevent potential issues in your claim and avoid an audit (more on this, below).
This holds particularly true given the evolution of the rules governing the ERC in Indianapolis (as is the case with the rest of the state, too!) and the disparities in calculations between 2020 and 2021.
When determining the ERTC for 2021, businesses must meet specific criteria, such as:
- Maintaining a staff count of less than 500 employees
- Ensuring timely tax return filing
- Suffering a financial setback
- Identifying wages that qualify
Eligible wages stand at a cap of $10,000 per employee per quarter, with the credit calculated at 70% of these qualifying wages.
For the IN ERC during 2020, the same foundational principles apply, albeit with a different calculation rate of 50%, as opposed to the 70% for 2021. Furthermore, entities with over 100 employees in 2020 are ineligible for the ERC benefit.
Applying for the ERC Indiana credit
When applying for the ERC Indiana credit, eligible employers will need to detail their total qualified wages, along with the corresponding health insurance expenses for every quarter in their quarterly employment tax returns.
For most employers, typically starting from the second quarter, this process will involve Form 941 as part of the ERC application. While the credit is applied against the employer's portion of social security tax, any excess beyond that can be refunded.
The refundable nature of this provision offers a significant uplift to companies that have borne the brunt of COVID-19's impact in Indiana.
PPP & the Indiana employee retention credit
The Consolidated Appropriations Act altered the original terms of PPP loans, with significant implications for businesses operating within Indiana.
The IRS took a step forward by issuing a news release that now permits "deductions for the payments of eligible expenses when such payments would result (or be expected to result) in the forgiveness of a loan (covered loan) under the Paycheck Protection Program ('PPP')."
In terms of the CARES Act guidance, amendments state that "no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan."
The previous guidance that disallowed deductions for eligible expenses if they could potentially lead to the forgiveness of a covered loan is now outdated.
This means that businesses in Indiana can now make dual ERC PPP claims simultaneously. However, it's important to tread carefully and avoid pitfalls that may arise from navigating these two relief options.
Nonprofits & the employee retention credit in Indiana
In Indiana, employee retention tax credits extend their reach to nonprofit organizations, encompassing churches as well as traditional small businesses.
Yet, understanding ERC for nonprofits eligibility criteria and maneuvering through the regulations can pose considerable challenges.
Nonprofits must successfully fulfill eligibility factors, including both the gross receipts test and the government mandate test.
For nonprofits going for employee retention credit in Indiana, the process involves submitting Form 941-X and noting the corresponding amount on Form 990. The credit's value hinges on the qualified wages and the total count of employees.
Is the employee retention credit taxable in Indiana?
The employee retention credit isn’t taxable in Indiana, but it does exert influence over your payroll deductions, subsequently affecting the taxable profits of your business. Given this scenario, comprehending the interplay between the ERC and taxable income is crucial for accurate reporting on pertinent tax forms, including 1120-S and 1065.
So, in answering “is ERC taxable income?”, the Indiana treatment of the employee retention credit varies based on:
- Claimed amount
- Annual payroll deductions, and
- Business entity structure
Note that this applies to ALL US states, not just Indiana.
ERC Indiana Audit
When it comes to ERC Indiana claims, ensuring accuracy in adherence to the IRS regulations is paramount when dealing with any tax credit or deduction.
Considering that the possibility of an ERC audit by the IRS exists, it's wise to take proactive measures to prevent such situations while also being equipped in case your Indiana-based business faces an audit.
With this in mind, you should be aware of:
- Strategies for preventing an audit
- Understanding the statute of limitations for an ERC audit
Guidance on handling audits, which our expert team can help you with
Scams relating to the ERC Indiana deduction
As the ERC Indiana deduction gains prominence, instances of employee retention credit scams are on the rise. Scammers are employing diverse tactics to deceive businesses and exploit the employee tax retention credit program.
The IRS has taken measures to warn against these scams, focusing on the significance of adhering to tax regulations and exercising prudence when engaging with third-party entities.
Although the Indiana small business employee retention credit itself is a legitimate refundable tax credit, it's imperative to stay informed about these prevalent scams:
- Fake Collections: Fraudsters deceitfully submit ERC claims on behalf of businesses and retain a substantial portion of the credit for themselves.
- Phone calls: Scammers reach out to employers via phone, making false assertions about ERC eligibility. They might disregard governmental prerequisites and impose exorbitant fees for unnecessary services, even if the business qualifies for the credit.
- Identity theft: These scammers target businesses that aren't eligible for the ERC, acquiring sensitive information and exploiting stolen identities to fraudulently seek the credit.
To avert falling victim to employee retention credit scams, businesses should:
- Collaborate with reputable tax professionals
- Validate their eligibility
- Communicate directly with trusted advisors
- Grasp ERC requirements themselves, and
- Exercise caution in the face of unsolicited advice or implausible guarantees
These measures serve to shield against fraudulent activities, ensure adherence to regulations, and fortify businesses against succumbing to scams.
How Brotman Law can help
Ready to harness the benefits of the ERC in Indiana? Look no further – Brotman Law is your dedicated partner in navigating the ins and outs of this invaluable opportunity.
Our experienced team of tax professionals is well-versed in the nuances of the ERC.
By partnering with Brotman Law's ERC tax attorney team, you can confidently navigate the intricacies of the ERC in Indiana, ensuring your business optimizes its financial stability while safeguarding against potential pitfalls.
Contact us today to learn how our expertise can drive your ERC success!
Undoubtedly, the ERTC credit holds immense potential for delivering substantial financial relief to businesses, be they traditional enterprises or nonprofits, that have grappled with the repercussions of the COVID-19 pandemic in Indiana.
However, delving into the specifics of eligibility and qualified wages can be intricate, with variations influenced by the size of the employer's operation.
Regrettably, the prevalence of current scams targeting vulnerable entities adds an additional layer of concern.
In light of these factors, we strongly advise getting in touch with us. Our expert consultation will aid you in determining your eligibility, optimizing your credit, and safeguarding against falling prey to unscrupulous scammers.
The US states we support through the ERC