Lykken on Lending

Chances are you’ve already heard of the PPP, because who hasn’t? But have you heard about the ERC? It stands for Employee Retention Credit, and it’s a program under the CARES Act that similarly helps business owners bounce back from COVID but in a totally different way. Under this program, a business that has retained employees during COVID can get a substantial amount of compensation per employee. How does one get hold of this program? Who is eligible? Lee Gillispie returns on the show with David Lykken to tell us more.

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Watch the episode here

Does Your Business Need A Financial Win In 2023 – Let’s Talk About ERC With Lee Gillispie

Readers, I’m excited to have Lee Gillispie back on the show. You say, “I don’t remember him being on the show for your regulars.” It’s been a while since we had him on. He was with a previous employer and we were talking back then about data scraping as a result of getting data off of forms. He was an expert at it. He still is but he’s found something new and exciting and we’re excited to share that with you. Lee, thank you for joining me on the show. It’s good to have you.

Thank you very much for letting me be on. I enjoyed the conference. It’s always fun talking to you, David. I’m looking forward to our dialogue.

I’m all about innovation and finding things that we could share with our audience that are meaningful. What you have found with Innovation Refunds is timely, especially in a time when many people are struggling with cashflow and anywhere we can find, we can get some government money of some sort. It’s well received. Let’s get into it and talk about it. Tell us a little bit about yourself and your background. What has got you to what you’re doing now?

I’ll give you a lifetime in 30 seconds. I’ve been in our industry for a little over twenty years. I started with an entrepreneurial company way back when and then joined Fiserv, which is the name everybody knows and I worked on the lending technology side for about sixteen-plus years. I enjoyed my time with them during that time. That’s where we met before.

We talked about OCR, artificial intelligence when it was new and how to do data analytics and use all of that technology to qualify documents and ensure the file was complete meeting CFPB guidelines. That dates you right there when the last time that we talked. It was way back then. Finding ways out of the paper world into the digital world that we’re largely into. I left Fiserv in late 2021. After a little while, things get stale, Dave. Maybe not for you but they do for me.

I know exactly what you mean. When you’re working for someone else, it’s like, “Never get stale when you have your business.” That’s for sure.

I started to look for something new. I wanted to do something FinTech, a small company that grows fast. I had enough juice for one more big push and I thought, “Why not?” I started looking around and found innovation refunds, which is an odd name for a FinTech company but I’ll tell you more about it as we get into it.

I’m excited getting into that but it was one of your friends that went to work for them who says, “You have got to hear about this.” First of all, tell us about what they do, the product and then what is it that captured your attention about it.

I hadn’t even heard of the employee retention tax credit before I had the conversation with the friend who got me into this business. What I found out was there’s a government program that was part of the initial CARES Act. This goes back to the start of COVID in March 2020. When PPP came out, the employee retention tax credit came out at the same time. The PPP was much easier to get. Everybody chose to go down that path. It was an either-or situation at that time, either PPP or ERTC. Things evolved, as they often do with government programs.

Employee Retention Credit: When PPP came out, the employee retention tax credit came out at the same time. The PPP was much easier to get, so everybody chose to go down that path.

How it worked was, about mid-year of 2020, they changed some of the parameters so a business could take both programs, PPP and the ERC, Employee Retention Credit. That’s what they called it at that time. The last adjustment was in December of ‘21 when they allowed nonprofits even to take advantage of it and extended and improved some of the payouts and timelines. That’s the evolution of it.

What it is specifically is an employment tax credit. This is a lender, a lending technology company, an ancillary company, a brokerage firm, an independent mortgage bank or anybody who is within our audience that has a business. If you had employees during COVID and despite revenue going up or down, you may be eligible for up to $26,000 per employee.

Did you say $26,000 per employee still, even though COVID has started to get in more in our rearview mirror, it’s still there?

It’s a government program that looks back. It starts to phase out in July of ’24. Folks need to get into it. It’s exactly that. If you had employees on the payroll and you paid them all during that time, your regular taxes, you kept them on and did the right thing, you are potentially eligible for up to $26,000 per employee. One last thing on this to give you a perspective. The average refund that our clients get is between $300,000 and $400,000 from the government. That’s big money for some average. We had some folks who will get a lot more and some folks will get less.

Employee Retention Credit: The average refund that our clients get is between $300,000 and $400,000 from the government.

My thought for this conversation is that the businesses in our industry did well during the COVID time. It was a boom town. Folks were moving and all of that stuff. It was great. Now is a down cycle. We have a lot of new companies and a lot of new businesses that did great during that time but they’re suffering. Even though their revenues were up during the COVID time, they’re still eligible. We’ve had well over 100 mortgage banks, FinTechs and LOS technology companies work with us. They’ve all got a refund despite the revenues because of the COVID changes that they had to go through and you remember that I bet.

Yes, we sure do. Talk about who is eligible for these types of programs. We understand that it’s available to any mortgage lender and pretty much any company. It doesn’t matter if mortgage lending or outside of mortgage lending. It’s available to the world. It’s not something unique to the mortgage industry or anyone associated with it. It’s beyond that. Our audience does that. That’s why you’re making the comments you did.

I’m most interested in getting into who’s qualified and what employees. It has to be FTE, Full-Time Employees, that you have working there. I’m assuming they still have to be employed there. We’ve had a big reduction in the workforce so you can’t claim this tax credit on employees that you let go of, I would assume. Is that correct?

What it does is it looks back to the employees you had during 2020 and ’21. If you had employees on the payroll then, that’s what they’re looking at and do. We do the math for you to be able to say, “This is what you’re eligible to get.”

I want to make sure I’m hearing that correctly. Even though you’ve done a substantial reduction of force, you could still get this tax credit on employees that are no longer employed there because you’ve done the reduction of force.

That’s exactly right because it’s about what you paid and is eligible to return during the ’20 and ’21. During those years, we were adding people. Revenues and employees were up. We’ve added more than ever to be able to deal with the COVID impact. The narrative that goes with the documents that we process is, “How were you impacted?” “I had to hire more people, go remote and do all these crazy things to keep the business moving.” That’s what makes you eligible to receive the ERC.

It’s pretty astounding, which is going to bring about some healthy level of skepticism about this. What does this have to do with amending tax returns and things like that? Where do we go with the implementation or the securing of this? How does someone go about getting it?

Here’s what we do first. We asked the business owner to take a ten-minute survey. It’s a click on our website. You go through that and put in some information. We quickly tell you, “Do we think you qualify? What would your potential payout be?” If you’re interested and passed that, then that’s all free. If you’re interested and passed that, we’re going to ask you to upload a bunch of payroll documentation from that time, as well as depending on your situation, there’s a dynamic form that says, “I’ll need these other things in addition to that information.”

What we do is digitize all of that information as quickly as possible and then we have some intelligent workflows, as you can imagine. All of that is analyzed with our proprietary software and then presented to CPAs and tax attorneys who are familiar with this Arcane Tax Law. It is a bit complicated. It’s true. Once that’s done, what we do is get it ready to be sent back to the IRS for an amended return with the application for the ERC. The client at that point has the choice. “I can go forward with it or I can choose not to do it.” At this point, nobody’s paid for anything.

No fees are being paid. Your only investment is the time of inputting the information into your website.

At that point, you choose to submit. It’s the government at that point. To speak honestly, it’s taken six months plus to get the money back.

When do you find out if you’re approved for the program? Is that what you’re talking about the whole approval process, then the funding of that happens pretty quickly or address that?

We monitor it for you all the way through the process with the IRS. We’re always pinging up, “We were looking for these. It’s been about time. Have you had a chance to review it?” Once that occurs, they’re going to say, “We’ve reviewed it. We’ve approved it.” At that point, we start the clock looking for the checks. You’re going to get multiple checks. For every quarter you’re eligible for these people, they’ll get checks for each of those subsequent quarters. It’s not one check. It’s a series of 4 or 5, maybe 6 checks, It could be even more than that.

One of the questions I have, as it comes to mind, is where do you make money in this process? You created a website. Are you getting a strip off of what the government sends them? What is your revenue model?

We don’t get paid until the client gets paid. We get 25% of what they get paid.

If I have this right, it’s a program that can even be applicable to employees you’ve cut because of the reduction in workforce and the volumes are down. The average past employees certainly cover existing employees. There are no fees upfront to start looking at this. No fees at all for anybody. You guys aren’t charging them any fees until they’ve been approved by the Federal government and they start receiving money.

That’s exactly right. We take responsibility for the work that we do. We have independent tax attorneys who review each of these submissions. They have their E&O insurance. If there’s a look back over time, we’re fully ready to participate with you but we’ve been successful so far. We passed 2 billion working with clients in terms of payouts and that’s in 1 year. We’re at the point where we expect toward the middle of 2022 when things are at peak, we expect to be processing work for 10,000 clients per month.

Who came up with this idea? It’s a program that the Federal government has. Is it through the IRS? Who sponsored the program in the Federal government?

The IRS has the pool of money associated with these payouts and refunds. They’re responsible to do the qualification and the work after the submission occurs. You talked about skepticism. That brings up for folks, “I want to hear from the IRS. This is trouble.” What we have found is that for the most part, if you’ve done your work correctly for these past returns, you can feel comfortable that when we process it, we qualify all of this stuff as well.

When we’re finished with it, you should be pretty comfortable like, “This is a good return. It’s not going to be audited. Who can tell I do not qualify for that? Who can tell what the government’s going to do in the future?” Everybody’s done the absolute best they can to be able to maximize the return for the client and we’ve been successful so far.

Lee, this is a fabulous program and so timely for so many who are looking for cash in every way they can because of the nature of our industry and where we’re at. There’s so much red ink everywhere out there. If people want to take a look at this program, how can they learn more?

What we talked about is the fact that you’re going to have a QR code on your site. I would suggest that any of your readers click on that QR code. It’s going to take them directly to the Innovation Refund site and the actual qualification questions or that quick survey. All they have to do is fill out that survey and submit it. We’re going to quickly look at it and then provide them some direct feedback that says, “If what you told us is true and the documentation supports it, this is what you should expect.” I want to emphasize $300,000 or $400,000 as an average return. What a lifeline that could be for our friends in this industry.

Lee, thanks so much for coming on again. Readers, check out the QR code on our show. If you don’t have that, then get ahold of us. We’ll make sure we send you the link and get you started. I appreciate you being here, Lee. Great information and program. It’s quite timely.

I appreciate the conversation. It’s always fun to talk to you and I look forward to seeing you soon.

I’m looking forward to it as well. Thank you, Lee.

Important Links

• Innovation Refunds
• https://www.LinkedIn.com/in/LeeGillispie/

About Lee Gillispie

Ohio State Alum. Enjoys working outside on a farm in Travelers Rest, South Carolina. Worked 20 years in Fiserv and felt the need to change scenery and big adventure. Joined Innovation Refund, a two-year-old Fintech. They built a platform from scratch using the smartest engineers in the business taking a paper-intensive process taking months to an automated process taking a day.