The ways in which the pandemic transformed our lives personally and professionally continue to reveal themselves. It can be argued that small businesses took the brunt of much of the upheaval and uncertainty. We’ve all heard stories about mom-and-pop companies getting left out in the cold as Paycheck Protection Program (PPP) funds were dispersed to massive corporations and millionaires. As they still work to stay afloat, many business owners might not realize there are other benefit programs available to them such as the Employee Retention Credit (ERC) and the Research and Development (R&D) tax credit.
Being an entrepreneur is hard enough – small business owners need to have working knowledge of every aspect of their company or organization – but working knowledge isn’t expert knowledge. There are areas where cutting corners can erode all your hard work and devastate your bottom line. Legal and financial are two areas where investing in professional assistance is likely to lead to extensive benefits in the long run.
Jay Woods founded Omega Accounting Solutions in 2007. The accounting and data firm focuses on the needs of small businesses so their owners can make informed decisions by leveraging the best accounting, advanced analytics and tax-credit expertise available. Additionally, Omega’s tax credit division has specially trained teams to help business owners claim ERC and R&D benefits they may not even realize they are qualified to receive.
Jay Woods Prior to the pandemic Omega mostly served clients in Southern California, but it’s gone national for its work with the ERC program and companies across the country are urged to find out if they’re eligible.
“I always intended to focus exclusively on small businesses when I opened my firm,” Woods, President of Omega Accounting, told California Business Journal. “During my early years as a CPA, I fell in love with what a small business owner represented: taking the initiative to go out and build something from scratch – it’s the American way. We’re a nation of risk-takers – people who’ve left other countries to come and start fresh. And I just I love that. I got exposed to it early in my career.”
Woods says that transitioning from the inside out — employee to small business partner — helped him develop a unique perspective of where the “gaps” sometimes exist. His firm fills those gaps on the administrative/accounting and finance side.
“It is a chance to take an element of their business they see as scary or feel unqualified to handle and turn it into a powerful empowerment tool,” he says. “Through our collaborations, they become more knowledgeable about every aspect of their business rather than avoiding it.”
It stands to reason that most small business owners go into an industry they know. Whether it’s a restaurant, yoga studio, hair salon or tech startup, it starts with passion and the belief that you can bring a product or service that’s needed. But, unless your business is legal, tax or accounting services, you are not going to have deep knowledge and experience in those areas essential to maximizing your business’ finances. Businesses can leave themselves vulnerable by not knowing what’s coming in and going out and analyzing these numbers on a regular weekly, monthly, quarterly and annual basis. Woods points out that if you are spending too much in one area and wait until your yearly financials to figure that out, you’ve compounded the issue 12 times over.
Another way in which companies undercut themselves is by not understanding the types of government incentives, subsidies and tax credits available to them.
“What I tell people as we move on from the pandemic is, ‘You went through all of this; how did it feel being a small business owner having to figure out PPP, EIDL [the Small Business Administration’s Economic Industry Disaster Loans], and the ERC? Did you have the right team by your side or were you scrambling?’ You don’t want to be scrambling,” he says. “If you’re going to take the leap and start a business, you really need to understand how the government sees that business and have the right advisors on your team. It’s eye-opening to discover how many people don’t know about the programs available to them.”
The ERC program gives employers a three-year window to claim the credit of up to $26,000 per employee for 2020 and 2021, depending on how their business was impacted by shutdown orders and the economic fallout. As things changed during the pandemic, the government sought ways to stimulate the economy and help small businesses. The bill creating the ERC was authored during the pandemic and further expanded in January 2021 through the CARES Act by the Biden Administration.
“The R&D program has been around for much longer,” says Woods. “The government initially created the credit in 1981 to incentivize U.S. businesses to create or improve products, processes, or technologies. We want to continue to lead the global economy, so we need to encourage the future Apples, Facebooks and Googles to invest in research and development. In truth, though, the credit is far more expansive than what we think of as typical ‘innovation’ companies. It is available in any industry that conducts technical work including construction, manufacturing, and agriculture. Many of these industries are underserved by the accounting community, so we’re trying to get the message out to them.”
Determining if you qualify for ERC or R&D can be complicated and often requires a specialized advisor such as Omega. Most accountants and CPAs don’t have the experience and expertise in government tax credits required to properly evaluate your eligibility for these lucrative tax credits. Once you start the process, Omega makes it easy for your business to maximize its tax benefits.
“There’s an interview and an application,” he says. “We collect some tax documents and determine if you meet the program’s qualifications. This entails a decrease in revenue because of lockdown orders or if your business was impacted in another severe way. Social distancing created challenges for many industries. Restaurants, for example, may have only been able to seat half the available tables or exclusively focus on takeout for weeks or months. Speak to an expert to review your situation to make that determination.”
To assist those who qualify for ERC even more, Omega has created a funding department on its lending side to help with IRS processing lag times.
“The IRS was also impacted by COVID, and they have a significant backlog,” says Woods. “So even if you find out you’re approved for these tax credits – and it can be as much as half a million dollars – you may still have to wait months to receive your refund. This affects a small business’s ability to get back on its feet, so we came up with a product where we can advance the funds while the company waits for its IRS check. Our business has always been centered on determining what our clients need and then creating products that will fill those needs.”
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