Helping Commercial Clients Access New Tax Credit

Helping commercial clients is also an opportunity for banks to increase fee income through a partnerships.

Commercial clients can access a payroll tax refund through the Employee Retention Credit (ERC); ERC providers that specialize in navigating the process can partner with banks to offer this service and increase their noninterest fee income and deposits.

The ERC was born out of the 2020 CARES Act, which is the same relief bill that created the Small Business Administration’s Paycheck Protection Program (PPP) loan. PPP clients may qualify for the ERC, which gives banks an opportunity to monetize their PPP client list. The ERC is easier for banks to implement than the PPP since it is not a loan: it is money that businesses are entitled to receive from the government. Once companies receive ERC funds from the U.S. Department of the Treasury, it’s the business owner’s money to keep.

Initially, the ERC tax credit was available to companies whose operations were fully or partially suspended from March 13, 2020, through Dec. 31, 2020. Back then, the maximum refund a company could receive was up to $5,000 per employee. Then, Congress made several modifications:

1. The Consolidated Appropriations Act extended the ERC to include wages paid before July 1, 2021. The maximum ERC amount was increased to $7,000 per employee and quarter.

2. The American Rescue Plan Act of 2021 included wages paid between July 1, 2021 and Dec. 31, 2021.

3. As of Sept. 30, 2021, the retroactive appeal of the ERC affected businesses that were originally scheduled to receive the ERC from Oct. 1 through Dec. 31, 2021.

Who Qualifies for the Payroll Tax Refund
Thanks to the payroll tax refund, banks that partner with an ERC provider can help their clients capture these rebates, benefiting from the higher deposits in their clients’ accounts. The IRS estimates that tens of thousands of businesses are eligible for the refund, which is available to both essential and non-essential businesses that were impacted by the pandemic. If a company experienced disruptions to commerce, travel or group meetings, it likely qualifies.

When banks empower their commercial clients with business opportunities they can take advantage of, both parties benefit in several ways, including:

Stronger relationships. Helping their commercial clients claim their payroll tax refund gives more trust and credibility.

Expanded services. Banks can set themselves apart from their competitors by offering assistance with navigating the ERC qualification and refund process.

Growth opportunities. With more noninterest fee income and deposits, banks can increase their budgets for other initiatives that help move their business forward.

While business owners may be tempted to go to their CPA to find out if they qualify, it’s recommended to go to an ERC provider that understands the intricacies and nuances involved in assessing eligibility. Choosing a highly qualified professional gives commercial clients a potentially higher refund amount than if they went to a general practitioner.

Banks that partner with an ERC provider can help their commercial clients navigate the payroll tax refund process easily and quickly. This partnership can then expand to additional services that allow banks to scale their commercial client base.