What would you say if I told you there is a special government tax credit that you’ve never heard about, but it will earn you a cool $5,000? You might say it’s a scam – but it’s not! Today, I’ll talk to the accounting firm in Utah that discovered this tax credit, and how you can get it.
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When I first heard about this tax credit, I was skeptical. We decided to investigate this tax credit for ourselves, and were pleasantly surprised to find out it’s not a scam – it’s a legit tax credit for 1099 workers. In this episode, I’ll talk to Mason Warr, CEO and Co-Founder of COS Accounting, about the credit, costs associated with it, and when it expires.
Intro to Mason Warr
- COS Accounting founded in 2019 by Mason Warr and Zach Bassett
- Saw a need and a way to help independent contractors
- Specializes in helping 1099 employees set up LLCs and S-Corps to help save on taxes
Employee Retention Tax Credit
- When the CARES Act passed, ERC was part of it – but was mostly overlooked
- Stimulus for your business
- If you earn $10,000 or more, you would qualify for the maximum credit of $5,000 (minus payroll tax)
- EIDL and PPP were both loans – this is a tax credit
What to Know About the ERC
- Expires at the end of the year!
- ERC may be extended by the government – not a guarantee
- Rideshare drivers definitely impacted – fewer people out at bars, airports, etc.
- 50% reduction in gross sales
How Getting the ERC Works
- Best way to save on taxes and qualify as an employee, set up an LLC taxed as an S-Corp
- Lyft/Uber pays your LLC – Your LLC pays you – you’re an employee of your LLC
- Could do it just as an LLC, too – just more effective as an S-Corp
- If you’re making $5,000 or more in profit, you will benefit from an S-Corp
Disqualifications for the ERC
- If you received a PPP loan
- If you received 4 weeks of unemployment in one quarter
- If COVID didn’t affect you, then you wouldn’t qualify
Is the ERC a Scam?
- In a world where we are all meeting virtually, how can people be sure this isn’t a scam?
- If you’re not sure, ask your accountant or call an accounting firm and confirm
- Call the IRS to see if it’s real!
- RSG looked into it – were pleasantly surprised! Low risk to take a call and see if it would benefit you
Fees Associated with the ERC Credit
- Taxes are around 15.3% – check will be $3,470
- Many people have to be restructured from a 1099 to an LLC
- States have their own particular taxes
- Around $1200-1300 total after taxes and fees
- Some drivers do qualify for more than the $5,000 tax credit – depends on your situation
- Thanks to Mason for coming on the podcast!
- It’s a free consultation – so if it doesn’t work for you, you haven’t spent any money
- You’ll probably spend around 3-4 hours figuring this out for a potential $2,000 pay out
- Low risk, potentially high reward