HVAC contractors, think you don’t qualify for an Employee Retention Tax Credit (ERTC), a federal cash giveaway to aid businesses affected by coronavirus pandemic-related disruptions?

Melanie Gentry, president of Comprehensive Employment Solution (CES), wants you to think again.

Gentry, whose company specializes in assisting home services businesses with tasks such as human resources and payroll management, said guidelines for ERTC eligibility have changed several times since the program began. Eligibility was expanded, and the credit amounts increased.

“A lot of them couldn’t qualify in the beginning, but as these changes happened, they could,” Gentry said.

The ERTC was introduced in March of 2020 to encourage businesses to keep workers on the payroll during pandemic shutdowns. It was initially part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

For 2020, the credit for eligible businesses is up to $5,000 per employee for the year. For 2021, the credit was boosted to up to $7,000 per employee for every quarter in which the business is deemed eligible.

Although the period covered by the ERTC program ended, for most businesses, with the third quarter of 2021, those that made it through the first 18 months or so of the pandemic can still apply, retroactively, for assistance based on their business experiences during that time. Even, Gentry added, if those businesses received another type of federal support, Paycheck Protection Program (PPP) money.

Gentry’s company has worked with more than 200 home services companies, many of them HVAC contractors, that have applied for ERTC money, and more than 100 of those have been paid, she said.

Professional Heating & Air in Hammond, Louisiana, is among the latter.

“I had heard about the Employee Retention Tax Credit, a few words here, a few words there,” said owner James Barras. “For no good reason, I just assumed we weren’t eligible.”

But he heard about CES’s take on the program through Service Nation, and he’d worked with CES before, so he decided to give it a go. He applied in May 2022, and within a few months had netted about $200,000, he said.

Barras said the money allowed him to invest in the business, easing some anxieties that would’ve been there otherwise. Professional, which has just over a dozen employees, didn’t lay off anyone during the worst of the pandemic.

The application, Barras said, was “a relatively painless process.” A lot of documentation was required, he said, but he had it all on hand.

Though Professional was considered an essential business and wasn’t subject to a shutdown, revenue dropped significantly for about a month in 2020, and there were also some kinks in the supply chain, Barras said.

“We did have some supply-chain disruptions, but not like I was hearing some other companies dealing with,” he said.

Gentry said contractors may be eligible for the ERTC if they were significantly affected because suppliers couldn’t get them enough product in 2020 and 2021.

“That happened industry-wide across almost every home services company that was trying to work,” she said.

In Lubbock, Texas, Keith Hart’s HVAC firm, Hart Heating & A/C, also benefitted from ERTC money. “It’s been extremely helpful,” Hart said.

Hart, who also received PPP money, applied last fall, and by early this year was getting paid, totaling about $220,000 in ERTC money, he said. There were no layoffs at his company in 2020 or 2021, he said, and he was able to keep paying six employees, including himself, while they were recovering from COVID.

“We’ve done some training. We’ve moved some people up,” he said. “I feel like it’s allowing us to make some good hires and do some good training.”

Importantly, Hart said, the money has enabled him to keep employees at a time when skilled trades workers are tough to find. At his company, he said, “They know they can depend on a check, even in the slow season.”

Hart said business dropped off dramatically during the early days of the pandemic, and that he worked through equipment shortages as well.

“It’s not all the way back to normal, but it’s close,” Hart said of the supply chain problems. “It’s getting better every day.”

Contractors who want to apply for an ERTC do so by filing amended employment tax returns for the applicable period. Tax credits are treated by the Internal Revenue Service (IRS) as taxes paid, so even ERTC-eligible businesses that had no tax liability in 2020 or 2021 may qualify for the cash, Gentry said.

However, businesses that receive ERTC money will likely have to amend their income tax returns, as the credit totals must be subtracted from the deductions that were initially taken on those returns for wages paid. Though ERTC money isn’t technically taxable, that requirement could increase an employer’s taxes for his or her ERTC-eligible period.

But, Gentry noted, as the ERTC applies to years that have passed, the payments often come with interest.

(The IRS has an online overview of the ERTC that includes a warning about scammers, plus a chart that outlines the ERTC’s parameters for 2020 and 2021.)

CES, Gentry said, has partnered with an accounting firm that’s well-versed in the IRS’s ERTC guidelines.

“Melanie’s company made it quick, easy, and I didn’t even have to worry about a thing,” said Bill Henzler, owner of Quality Degree Heating & Air Conditioning in Royersford, Penn., which also got ERTC checks.

Applicants pay a $2,000 deposit that’s refunded if they’re not eligible; if ERTC money is received, the fee shared by the accounting company and CES, including the deposit, totals 15%.

The accountants will also represent their ERTC clients in the event the IRS later returns with questions or conducts an audit, Gentry said. If an audit is not successful, she said, the fee would be returned to the client.