COS Accounting is a firm based in Provo, Utah. They reached out recently to let us know about the Employee Retention Credit (ERC), which was part of the COVID Relief Package. Any 1099 worker is eligible for this $5,000 credit, and if you’re married or have kids, the credit could be up to $19,000!
Senior RSG Contributor Joe Pierce decided to give COS Accounting a spin and it worked out so well, we partnered with them to try and get this money to as many drivers as possible before the credit expires on December 31st, 2020.
If you’re ready to sign up with COS Accounting and see if you qualify for the $5,000 credit, please click here.
What is the Employee Retention Credit (ERC)?
The Employee Retention Credit (ERC) is a tax credit designed to help small businesses recover from the impacts of Covid-19 on their business. The ERC is NOT a loan, it is a tax credit, meaning that it does not have to be repaid.
How Much Can I Claim with the ERC?
The Employee Retention Credit pays out 50% of an employee’s income, up to $5,000.
Say you have made $8,000 this year: You can claim $4,000 for the ERC. If you made $16,000, you can claim $5,000, because that is the highest it will pay out, even though it’s less than half of your income.
The ERC is paid out per employee. For those who have a spouse and children, there are additional credits that can increase the refund amount if certain criteria are met. This will be explained more below.
How Can I Claim the ERC?
The first thing you need to do is set up a Limited Liability Corporation (LLC). The ERC is designed for small business owners, so by setting up your own LLC, you now run your own business.
You can then count all of your 1099 earnings (driving, delivery, or any other side gig/1099 work) as earnings towards your business.
Once you set up your own LLC, the process is easy. COS Accounting has a team that walks you through the qualification process, will set up the LLC, file your forms for you, and can give you an estimate on the phone of how much money you can claim. COS knows the ERC inside and out, and will make sure to help you claim as much as you can.
When we first heard about this offer, it honestly sounded too good to be true, but it’s one of the provisions that was buried deep in the CARES Act, and not many people or tax firms know about it. COS has already helped over 1,000 folks claim this credit, so they know what they are doing.
If you would like to try to claim the ERC credit yourself, you will still need to set up an LLC (processes, fees and taxes vary by state), track and detail your income for the year, file your Q4 Taxes for your business and file, sign, and attach a 941 Form. Once you send that to the IRS, they may take a few weeks to process and get back to you regarding errors that you will need to fix.
Since we only discovered this credit recently, I don’t recommend the do it yourself approach here since you want to make sure you get it right on the first time and get your paperwork in ASAP. I have a feeling that this credit could become very popular and tougher to get if more people find out about it.
How Do I Know if I Qualify?
The IRS will be looking for key factors to make sure you qualify for the ERC, and these can include:
- Was your job impacted by COVID? This can include local governmental restrictions, earning less this year than last year, or disrupted operations (keeping 6 feet from clients).
- How many weeks worth of unemployment you took. Taking unemployment does not automatically disqualify you from receiving the tax credit, but it can impact it.
- Did you receive the Paycheck Protection Program (PPP) loan? Unless you have already set up an LLC, this won’t be anything to worry about. If you did set up an LLC, and received PPP funds, you are disqualified from the ERC credit as well.
- How much have you made this year? Despite what you might think, the more you have made, the better. As stated above, this credit will pay out up to $5,000 if you have made $10,000 or more. So try to keep track of all the 1099 income you have made this year.
When Will the Money Arrive in My Bank Account?
The wait for the check to come is the worst part about the ERC. COS Accounting customers have received their tax credit around 14 weeks after applying, and with the rush of people applying before the credit expires, it could take even longer.
If you would like to receive your money sooner, you need to apply as soon as possible.
How Much Does COS Accounting Charge?
COS rates range from $500 to $2,500, depending on each situation. According to COS, the majority of clients fall into the $500-$1,000 range.
To be clear: You aren’t charged anything unless you qualify for the tax credit, so there is no risk on your end to at least check!
If you are a single driver who has made $10,000 or more, and the process is fairly simple, their rate would be $500 from the $5,000 you earn. You will also need to pay the cost of the LLC set up (varies by state, Utah for example, is $300) and your Q4 taxes ($55 in my case, the cost of filing our quarterly taxes).
The credit will come pre-taxed, so the check you will receive will be for about $3,500 (aka $3,000 of free money!)
The Employee Retention Credit is set to expire December 31st, so if you are interested in claiming these free funds, fill out their qualifier form here, and a member of their team will contact you within 48 hours.
My Experience with COS Accounting
I filled out the qualifier form on a Sunday and was contacted the next day via phone. The initial conversation lasted about 30 minutes, and they were able to determine that both my wife and I (she is an Independent Contractor as well) would qualify for a total credit of $10,000. During the call, we also determined that it would make the most sense for my wife and I to set up a joint LLC as an S Corporation.
Now, I also mentioned that we have 2 daughters, and this qualified us for an additional $6,000. And we received an additional $3,000 for business taxes bringing the total credit to $19,000! Our heads were spinning! After taxes and COS’s fee, we’re going to be ahead $13,300 – incredible.
We chose to let COS handle everything, from the creation of the LLC as an S Corp to applying for the ERC. They submitted the initial LLC filing paperwork and 2 days later it was approved.
The following business day they submitted the ERC paperwork, and now we just wait for the check to arrive. It was a completely painless process, COS did all the heavy lifting, I can’t recommend working with them enough.
Drivers, have you heard of the ERC credit before? And are you interested in applying? If so, fill out their qualifier form here.
-Joe @ RSG
Frequently Asked Questions
How many weeks of collecting unemployment would disqualify someone from the ERC?
If you have collected more than 4 weeks of unemployment in this 4th fiscal quarter (October 1st – December 31st) you would be disqualified. If you collected 1-4 weeks then it would be based on a case-by-case basis.
What about drivers in California (CA)?
Drivers in CA qualify for this credit but there is an additional annual franchise tax fee of $800 for LLCs that must be paid every year. So in order to qualify for the credit, you would need to pay this additional tax plus the cost to set up an LLC in California. So it’s definitely still worth it but your credit will be less because of this fee.
It’s important to note that if you want to get rid of your LLC in the future, you can’t just stop paying the fee. You need to cancel it with the state of California.
What does an LLC provide?
LLC stands for Limited Liability Corporation. In the context of a driver/gig worker, its main benefit is liability protection since taxes for LLCs are treated as pass-through to your personal taxes. There is no tax benefit of setting up an LLC, but you could receive liability protection if a passenger were to sue you.
What is an LLC as S Corporation?
The biggest benefit of registering your LLC as an S-Corporation is the tax savings. All your earnings flow through your entity rather than the individual.
What are the risks or potential downsides?
If you’re worried about this fund running out of money, don’t be – it’s very unlikely. Also, hundreds of clients of COS Accounting have already received their money – there’s no catch to this!
If you file as an LLC, you will have to file quarterly taxes, but you can cancel your LLC once you get the check if you no longer are operating the business anymore.