RSG 151: Mason Warr on the $5,000 Employee Retention Credit

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. 

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

Outro

  • 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

Show Notes