
Alright, everybody, so the SBA this week came out and said that it has stopped accepting new PPP applications from most lenders. The SBA informed lenders this past Tuesday that the PPP general fund was out of money and that the only remaining funds available for new applications are $8 billion set aside for community financial institutions (CFIs), which are institutions that specifically work with businesses in underserved communities. But all is not lost, dear small business owners of America. If you missed out on the PPP or if you did not qualify for the PPP, don't lose hope because you may still qualify for the employee retention credit on all those wages you didn't claim for PPP forgiveness, and this employee retention credit could be worth up to $28,000 per employee. And yes, even if you got PPP money, you can still get a piece of this employee retention credit cake.
How It Works
Even if you do not own a company, be sure to share this video with company owners you know, this video might actually be worth tens of thousands of dollars for them. And if you are a service owner and after you view this video you want to talk with me and a member of my group, who will likewise be either a CPA like myself or an EA, shoot me an email, [email protected], inform me a little about your company and your ballpark year-over-year profits, and let's see if we can get some more money back in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by minimizing your needed employment tax deposits or you can ask for an advance payment of the credit utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Since that's the things your CPA should stress about, I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll stuff. In this video I wish to inform you what you need to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why have not you informed me about this?" You can be informed and take ownership of your own tax circumstances, of your organization's tax situation to create more cash circulation in your service and more wealth for yourself.
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About Employee Retention Credit Taxable Income
Alright, now let's dig into this and let's talk about the employee retention credit or the ERC as some folks like to call it, before I get into this, I want to say that nothing in this video is to be taken as legal or tax suggestions, this video is for general informative functions just, yes, I am a tax and a certified public accountant expert, however I am not your CPA nor your tax expert unless you have engaged my firm. Another disclaimer here, for purposes of this video I am presuming that if you're enjoying this you are a small company owner, which for employee retention credit functions suggests one hundred or less workers for functions of the 2020 credit and five hundred or fewer workers for purposes of the 2021 credit, if you have a company with over 5 hundred employees I envision you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small company owners who might work with a local tax expert who is so neck-deep in tax returns today since the federal government extended the tax due date to May 17 or volume is just the nature of their organization that your tax expert hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so rewarding for business owners in 2021 and why weren't we talking about it in 2020, it's been around since then, since the CARES Act? Yes, the employee retention credit has been around given that the CARES Act that was passed over a year ago in March 2020, however the employee retention credit didn't get much love last year in 2020 due to the fact that of the PPP, the Paycheck Protection Program.
The stimulus costs passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more appealing. Generally the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular girl with thick glasses and unkempt eyebrows and her hair up in 2020 to the belle of the ball for business owners in 2021. Why? Why is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll tell you why, a few reasons.
Why Employee Retention Credit Taxable Income
Reason, the employee retention credit for both 2020 and 2021 is now available to PPP recipients, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your staff members and after that turn around and claim the employee retention credit on those salaries as well. The federal government does not look too fondly on paying your payroll for you through the PPP and then you declaring a credit against the taxes you pay the government on those incomes that the government paid for you. That makes sense. Now, there's some planning here. If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to choose the very best covered period that will get you full PPP forgiveness however likewise optimize your employee retention credit.
Also, for PPP forgiveness, you wish to fill that payroll container with as many costs as possible that do not count for employee retention credit purposes. You can't claim the employee retention credit on state joblessness insurance contributions, however state unemployment insurance coverage contributions count toward PPP forgiveness, see? You 'd desire to dispose all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much common salaries as possible to take the employee retention credit on.
So this can get really technical very quickly and it's very situation particular in terms of optimizing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to dig into all that here, however simply understand that you really have to do the mathematics when doing your PPP forgiveness to ensure you're not leaving anything on the table in terms of the employee retention credit. Another thing to note is you can't subtract the wages you claimed the employee retention credit on, which makes sense also, why should the government offer you a deduction for these incomes that they already offered you a credit for? Essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply love discussing this things, but let's discuss another factor why the employee retention credit is more attractive now than it was last year, which is that it's easier to qualify for the employee retention credit in 2021. In 2020, for a quarter to qualify for the employee retention credit, you had to reveal a 50% decrease in gross invoices compared to the very same calendar quarter in 2019.
In 2021, for a quarter to certify for the employee retention credit, you just need to show a 20% decline in gross invoices compared to the same calendar quarter in 2019. This indicates far more services will certify. My company, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
I didn't certify for the 2020 employee retention credit initially, due to the fact that I got very first round of PPP money and 2nd since my company didn't suffer that big 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company certifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, meaning that, for example, even if your Q1 2021 gross invoices aren't at least 20% lower than your Q1 2019 gross invoices, you can compare for purposes of figuring out eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you qualify for Q1 2021 based upon Q1 2021's gross invoices, you will likewise receive Q2 2021 given that you certified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply qualify for Q1 and Q3 2021, you also receive Q2 and Q4 based upon the lookback. Likewise, even if you didn't have a sufficient decrease in earnings, you can qualify for the employee retention credit if you were required to fully or partially suspend operations in your company throughout any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are qualified for the employee retention credit during that period of partial or full shutdown.
Common example, you own a dining establishment, and your guv signed an executive order stating that you need to shut down indoor dining. That is an example of a partial shutdown. Not only are more companies eligible for the employee retention credit thanks to these brand-new laws, making PPP recipients qualified for the employee retention credit though not on the same incomes and making more services eligible through the 20% decline threshold rather than the 50% decline limit, however the 2021 credit is also more financially rewarding than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit amounted to 50% of all qualified wages for 2020, the employee retention credit was equal to 50% of all qualified incomes you paid staff members in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in incomes for that whole time duration. So the optimum 2020 credit per staff member was $5,000. Okay, but that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that entire time duration? No. Per quarter. So for 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in incomes per staff member per quarter, so we're discussing a maximum credit of $7,000 per worker per quarter. If you're eligible all 4 quarters, $7,000 times 4 is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per employee. That's substantial. That's a godsend to many organization owners today. You see what I mean now, right, how the employee retention credit has gone from ugly duckling in 2020 to lovely swan in 2021? And by the way, by the method, certified earnings includes employer-paid medical insurance premiums.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to select the best covered duration that will get you full PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this things, however let's talk about another reason why the employee retention credit is more attractive now than it was last year, and that is that it's simpler to qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, because I got very first round of PPP cash and 2nd since my company didn't suffer that big 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Not just are more services qualified for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the same salaries and making more businesses eligible through the 20% decline limit rather than the 50% decline threshold, however the 2021 credit is also more rewarding than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified salaries per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that whole time period?
Exactly How to Get going
The very best means is to deal with a no-risk, contingency-based price financial savings firm. That will certainly negotiate on behalf of their clients to obtain the most effective prices feasible for their existing customers. They will examine old invoices for mistakes obtaining for their clients refunds as well as tax credits. They can raise the earnings as well as total valuation of their clients organizations.
Services supplied can include:
Committed professionals that will certainly interpret highly complex program policies and will be readily available to address your questions, including:
Just how does the PPP funding variable into the ERC?
What are the distinctions in between the 2020 and 2021 programs as well as exactly how does it put on your company?
What are aggregation guidelines for larger, multi-state employers, as well as exactly how do I interpret multiple states executive orders?
How do part-time, Union, and tipped employees influence the amount of my reimbursements?
Thorough evaluation concerning your qualification
Comprehensive evaluation of your situation
Support on the claiming process and documentation
Specific program expertise that a normal CPA or pay-roll cpu might not be well-versed in
Rapid and smooth end-to-end procedure, from eligibility to claiming and also receiving reimbursements
Adams Brown Strategic Allies and CPAs https://www.adamsbrowncpa.com/ertc-tax-credit-consulting-new-york/ |
Finance Pro Plus https://www.financeproplus.com/ |
Bottom Line Concepts https://erc.bottomlinesavings.com/ |
Equifax Workforce Solutions https://workforce.equifax.com/solutions/employee-retention-credit |
Valiant Capital https://erc.valiant-capital.com/ |
NYC Business https://www1.nyc.gov/nycbusiness/article/nyc-employee-retention-grant-program |
Omega Funding solutions https://www.omegafundingsolutions.com/ |
Disisaster Loan Advisors https://www.disasterloanadvisors.com/ |
ERTC Filing https://info.ertcfiling.com/employee-retention-tax-credit-new-york-11368/ |
Ready To Get Going? Its Simple.
1. Whichever company you pick to work with will determine whether your business certifies for the ERC.
2. They will examine your request and calculate the maximum quantity you can obtain.
3. Their group overviews you via the claiming process, from beginning to end, consisting of appropriate documentation.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 as well as ends on September 30, 2021, for eligible businesses.
You can make an application for reimbursements for 2020 as well as 2021 after December 31st of this year, right into 2022 as well as 2023. As well as possibly past then as well.
Many companies have received refunds, as well as others, in enhancement to refunds, also qualified to continue receiving ERC in every pay-roll they refine to December 31, 2021, at about 30% of their payroll cost.
Some businesses have actually obtained reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can now get approved for the ERC even if they currently obtained a PPP car loan. Note, however, that the ERC will just put on salaries not utilized for the PPP.
Do we still accredit if we did not) incur a 20% decline in gross receipts .
A federal government authority needed partial or full closure of your service throughout 2020 or 2021. This includes your operations being restricted by commerce, failure to take a trip or constraints of team meetings.
- Gross invoice reduction requirements is different for 2020 as well as 2021, yet is measured against the current quarter as compared to 2019 pre-COVID quantities:
- A federal government authority needed partial or full shutdown of your service throughout 2020 or 2021. This includes your procedures being restricted by business, inability to take a trip or limitations of group meetings.
- Gross receipt reduction standards is various for 2020 and also 2021, but is measured versus the current quarter as contrasted to 2019 pre-COVID quantities.
Do we still qualify if we remained open during the pandemic?
Yes. To qualify, your company should fulfill either among the complying with standards:
- Experienced a decrease in gross invoices by 20%, or
- Had to alter organization operations due to federal government orders
Lots of items are thought about as modifications in service operations, including shifts in job duties and also the purchase of extra protective equipment.