Are you a business owner in Iowa struggling with the complexities of claiming the Employee Retention Credit (ERC)?
Just like in many states, applying for the ERC comes with its unique challenges, particularly with the IRS audits.
Despite this, don't lose hope. Brotman Law is here to guide you through the ins and outs of how the ERC operates in Iowa. Whether you're in need of ERC audit assistance or expert guidance, our ERC attorneys are ready to support you.
Keep reading to uncover the essentials of the ERC in Iowa.
What is the new Employee Retention Credit in Iowa?
The new Employee Retention Credit in Iowa is a tax credit designed to provide financial relief to businesses adversely affected by the COVID-19 pandemic. This credit allows eligible employers to claim a percentage of qualified wages paid to employees, up to a maximum of $7,000 per employee per quarter.
Does Iowa conform to the Employee Retention Credit?
Yes, Iowa conforms to the Employee Retention Credit as per the IRS guidance. This is due to the credit being a national incentive rather than anything state-specific. As such, business owners deal directly with the IRS rather than any state authorities, such as the Iowa Department of Revenue.
Eligibility for the Iowa ERC credit
To qualify for the Iowa ERC credit, businesses must meet certain eligibility criteria. The ERC in Iowa is available to employers who have experienced a partial or full suspension of their operations due to government orders or a significant decline in gross receipts.
To determine if your business meets the ERC qualifications in Iowa, it is essential to review the specific requirements outlined by the IRS.
To find out more about the eligibility criteria and how to apply, please refer to our guide on ERC qualifications resource.
Calculating the Iowa ERC grant
Calculating the Iowa ERC grant requires a thorough understanding of the qualifying wages and eligible employees.
For claims relating to 2021, the calculation is 70% of the “eligible wages”, with a maximum amount of $7,000 per employee per quarter. Business also can’t have more than 500 employees.
The calculation is similar for 2020, however you can claim up to 50% of the eligible wages, but your business can’t have had more than 100 employees in the qualifying period.
It;s also important to note that the ERC claim cannot exceed the employer's share of Social Security taxes for the same period.
To better understand how to calculate the credit, check out our comprehensive ERC calculation guide.
Applying for the Iowa business ERC grant 2023
Applying for the Iowa business ERC grant in 2023 involves a standard process that eligible businesses should follow.
To apply, take these steps:
- Check your eligibility, keeping in mind the different rules for 2020 and 2021
- Ensure your business operations were sufficiently suspended
- Calculate your eligible wages
- Use Form 941 to make your application
A number of documentation requirements must also be met, including:
- Maintaining records of the qualified wages
- Amount of eligible employees
To ensure a smooth application process, check out our detailed ERC application guide.
PPP & the Iowa Employee Retention Credit
The IRS has confirmed that eligible expenses for loan forgiveness under the Paycheck Protection Program (PPP) can now be deducted under the Employee Retention Credit, too.
This means that businesses can take advantage of tax deductions for these expenses. Combining these benefits, however, should be approached with caution due to potential risks.
It's important to carefully consider these factors to avoid any complications that may arise. It will be easier for businesses to operate in this landscape smoothly if they make informed decisions and take the right steps.
Knowing how to handle these programs is important, so be sure to check out our combined ERC PPP guide. Time to get smart about your PPP and ERC options – your business will thank you!
Nonprofits & the Employee Retention Credit in Iowa
If you're running a nonprofit organization in Iowa, you may be eligible for the Employee Retention Credit, just as regular entities in the US are.
And the eligibility requirements remain the same, with the tests being:
- Government mandate test
- Gross receipts test
When it comes to making the tax credit claim, you’ll need to file Form 941-X and also Form 990
This all sounds simple on paper, but we highly recommend you check out our complete guide on the ERC for nonprofits.
Is the ERC taxable in Iowa?
No, the ERC isn’t taxable in Iowa. Any amount of the Employee Retention Credit that you receive isn’t specifically as income, and so it isn’t directly taxable. However, it does impact payroll deductions, which affects taxable profits.
As you can see, as with all-things-ERC, answering the question of “is ERC taxable income?” isn’t simple, especially since the following need to be taken into account:
- Entity type
- Credit amount claimed, and
- Payroll expense deductions during the year
Navigating ERC Iowa audits
Businesses in Iowa that claim the Employee Retention Tax Credit may be subject to an ERC audit, as is the case with any state in the US.
These audits are conducted to ensure that businesses are accurately claiming the credit and meeting all eligibility requirements. If improperly claimed, businesses may have to repay the credit or face other penalties and consequences.
To avoid any issues that may arise during ERC Iowa audits, businesses should make sure to keep detailed records and documentation of their claims for the credit. The information can be used to determine eligibility and validate the amount of credits claimed.
Moreover, consulting with a tax professional can help ensure proper compliance and minimize penalties, such as the team here at Brotman Law.
Scams to be aware of in the Hawkeye State
Yes, sadly, Employee Retention Credit scams in Iowa are on the rise, with the most common ones being:
- Posing as government agencies or tax professionals and trying to obtain sensitive information or money from unsuspecting businesses.
- Getting hold of your personal information under a ruse to help you file a claim
To protect against Employee Retention Credit scams, businesses should exercise caution and follow these key steps:
- Be skeptical of unsolicited calls, emails, or messages claiming to offer assistance or requesting personal information.
- Verify the legitimacy of any communication by independently contacting the relevant government agency or tax professional using verified contact information.
- Keep confidential information secure and only share it with trusted and verified entities.
- Stay informed about common scams and tactics used by fraudsters to avoid falling victim.
How Brotman Law can help you
When it comes to dealing with the complexities of the Employee Retention Credit (ERC) in Iowa, our team here at Brotman Law are the very best at what they do.
Our ERC tax attorneys specialize in navigating the complexities of tax law and can provide expert assistance according to your specific situation.
Whether you require assistance in determining your eligibility, calculating your qualified wages, or defending your claims during an audit, our team is prepared to offer their expertise.
Don't let the complexities of the ERC in Iowa intimidate you. Contact Brotman Law today and schedule a consultation with an experienced ERC tax attorney.
The ERC is a valuable tax credit that provides crucial financial support to businesses in Iowa, particularly during challenging times.
The first step, especially to avoid an ERC audit, is to ensure your Iowa business is eligible for the tax credit in the first place.
If you do proceed with a claim, ensure all your workings and financial records are in order, so if an audit does arise, you’re best-placed for a smooth ride.
No matter your situation, you can always utilize our experts’ knowledge to assist you.
The US states we support through the ERC