Stenson Tamaddon LLC: Specialized Tax Advisory and Employee Retention Credit

Tax incentives can provide significant financial relief for businesses, but navigating tax credits and compliance requirements is challenging. Companies seeking to maximize benefits need expert guidance to meet eligibility criteria and avoid costly errors.

Stenson Tamaddon LLC helps businesses access tax incentives, focusing on optimizing claims and maintaining compliance. Their expertise includes specialized tax advisory services and coordinating Employee Retention Credit (ERC) claims.

Focus on Specialized Tax Advisory Services

Navigating tax regulations requires a deep understanding of changing laws, deductions, and compliance requirements. Many businesses struggle with complex provisions, leading to missed opportunities or unintended liabilities. Stenson Tamaddon LLC provides advisory services to help companies structure financial strategies that maximize incentives while ensuring compliance.

A key aspect of tax planning is structuring deductions and credits to reduce liabilities. Section 179 of the Internal Revenue Code allows businesses to deduct the full purchase price of qualifying equipment and software in the year it is placed into service rather than depreciating it over time. This improves cash flow and supports investment decisions, but businesses must ensure eligibility and proper documentation.

Entity structure also affects tax obligations. A C corporation is subject to double taxation—once at the corporate level and again when dividends are distributed. In contrast, S corporations and LLCs pass income directly to owners, avoiding corporate tax but requiring compliance with IRS regulations. Stenson Tamaddon LLC helps businesses evaluate entity structures for tax efficiency.

Employee Retention Credit Coordination

Maximizing the Employee Retention Credit (ERC) requires understanding eligibility rules, interactions with other relief programs, and how to claim the credit for different tax periods. Many businesses mistakenly assume they no longer qualify due to receiving Paycheck Protection Program (PPP) loans, but legislative updates allow companies to claim both benefits under certain conditions. Proper coordination ensures businesses do not overlook refunds or miscalculate the credit, which could lead to audits or repayment demands.

The ERC applies to wages paid during specific periods affected by COVID-19-related disruptions. In 2020, eligible employers could claim 50% of qualified wages per employee, capped at $5,000 for the year. In 2021, the credit increased to 70% of wages per quarter, with a maximum of $7,000 per employee per quarter for the first three quarters. A business qualifying for all eligible quarters in 2021 could receive up to $21,000 per employee. Allocating wages correctly between ERC and PPP loan forgiveness is essential, as using the same wages for both programs is prohibited.

A company may qualify for the ERC if it experienced a significant decline in gross receipts. The IRS defines this as a reduction of at least 50% in a 2020 calendar quarter compared to the same quarter in 2019. For 2021, the threshold was lowered to 20%, expanding eligibility. Employers must analyze revenue trends to confirm qualification.

Claiming the ERC retroactively requires filing Form 941-X to correct previously filed payroll tax returns. Because the credit is refundable, businesses can receive a cash benefit even with little to no tax liability. However, IRS processing times for amended returns can be lengthy, requiring businesses to plan for potential delays. Any ERC refund must also be properly accounted for in financial statements to avoid misstating taxable income and triggering IRS scrutiny.

Documentation for Credit Eligibility

Proper documentation is essential for a defensible ERC claim. Without detailed records, businesses risk IRS audits, disallowed credits, and potential repayment obligations. Employers must maintain records substantiating eligibility, including proof of operational disruptions, payroll data, and financial statements. Since ERC claims are subject to IRS review for up to five years, retaining comprehensive documentation is necessary.

Employers must demonstrate how government orders affected business operations. This includes copies of federal, state, or local mandates that resulted in capacity restrictions, supply chain disruptions, or other significant limitations. General claims of impact are insufficient; documentation must clearly link restrictions to measurable declines in business activity.

Supporting payroll records are equally important. Employers must retain wage reports, payroll tax filings, and records of health plan expenses included in the ERC calculation. If a business used a third-party payroll provider, obtaining reports that break down qualified wages by employee is essential. Additionally, businesses should document any furloughs, reductions in work hours, or terminations that may impact the credit calculation.

Credit Calculation Variations

Determining the ERC requires careful consideration of wage allocations, employer size classifications, and related-party ownership rules. The amount a business can claim depends on the number of full-time employees (FTEs), as defined under the Affordable Care Act. Companies with 500 or fewer FTEs in 2021 could claim the credit for all wages paid during an eligible period, while larger employers were limited to wages paid to employees who were not providing services. Misclassifying FTEs can lead to incorrect claims.

Ownership structure also affects ERC eligibility. The IRS prohibits claiming the credit for wages paid to majority owners and their immediate family members under Section 267(c) attribution rules. For example, if a business is 80% owned by one individual, wages paid to that owner’s spouse, children, parents, or siblings are ineligible. Failing to account for these restrictions can result in disallowed credits and penalties.

Corporate Tax Filing Adjustments

Claiming the ERC affects corporate tax filings, requiring businesses to adjust previously reported figures to comply with IRS regulations. Since the ERC is a payroll tax credit rather than an income tax deduction, businesses must ensure that wages used to calculate the credit are not also deducted as payroll expenses on income tax returns. This adjustment prevents double tax benefits and must be made in the tax year corresponding to the wages for which the credit was claimed.

For businesses that filed income tax returns before claiming the ERC, an amended return may be required to correct the deduction. This is done using Form 1120X for C corporations or Form 1040-X for sole proprietors and pass-through entities. Failing to make these adjustments can lead to IRS audits and penalties for overstated deductions. Additionally, partnerships and S corporations must ensure ERC-related adjustments are properly reflected in Schedule K-1 allocations to partners or shareholders. This ensures individual tax filings align with revised corporate tax figures, preventing discrepancies that could trigger IRS scrutiny.