Why Employee Retention Ertc 2021

Factor, the employee retention credit for both 2020 and 2021 is now offered to PPP receivers, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your employees and then turn around and declare the employee retention credit on those earnings. The government does not look too fondly on paying your payroll for you through the PPP and after that you claiming a credit against the taxes you pay the federal government on those earnings that the federal 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 need to choose the very best covered period that will get you full PPP forgiveness however likewise optimize your employee retention credit.



For PPP forgiveness, you desire to fill up 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 unemployment insurance contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? You 'd desire to dispose all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much regular salaries as possible to take the employee retention credit on.

So this can get very technical very quickly and it's extremely scenario specific in regards to enhancing PPP vs. ERC and my company has tools to figure this things out for you, I'm not going to go into all that here, however feel in one's bones that you really need to do the math when doing your PPP forgiveness to make certain you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't deduct the incomes you claimed the employee retention credit on, which makes good sense also, why should the government provide you a deduction for these earnings that they already offered you a credit for? So essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply like speaking about this things, but let's discuss another reason that the employee retention credit is more appealing now than it was last year, which is that it's simpler to get approved 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 exact same calendar quarter in 2019.

However in 2021, for a quarter to get approved for the employee retention credit, you only need to reveal a 20% decrease in gross receipts compared to the same calendar quarter in 2019. So this implies far more businesses will qualify. My organization, for example, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.

So I didn't get approved for the 2020 employee retention credit initially, because I got very first round of PPP cash and 2nd due to the fact that my company didn't suffer that big 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization qualifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, implying 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 determining eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Ramification here is that if you receive Q1 2021 based upon Q1 2021's gross invoices, you will likewise get approved for Q2 2021 given that you qualified in the lookback quarter of Q1 2021.

Same thing for Q2 to Q3 and Q3 to Q4, so basically if you just qualify for Q1 and Q3 2021, you likewise certify for Q2 and Q4 based upon the lookback. Likewise, even if you didn't have an enough decrease in income, you can receive the employee retention credit if you were required to totally or partially suspend operations in your service during any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are qualified for the employee retention credit throughout that period of partial or full shutdown.

Typical example, you own a dining establishment, and your governor signed an executive order specifying that you require to shut down indoor dining. That is an example of a partial shutdown. Not just are more services 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 very same wages and making more services eligible through the 20% decline threshold rather than the 50% decrease threshold, 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 was equal to 50% of all certified earnings for 2020, the employee retention credit amounted to 50% of all qualified incomes you paid employees between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in wages for that entire period. So the optimum 2020 credit per staff member was $5,000. Not bad, however that's absolutely nothing compared to the 2021 credit because for 2021, the credit amounts to 70% of certified incomes per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that whole time period? No. Per quarter. For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in incomes per worker per quarter, so we're talking about an optimum credit of $7,000 per employee per quarter. If you're eligible all 4 quarters, $7,000 times four is $28,000. That's right, folks, the optimum 2021 employee retention credit is $28,000 per worker. That's big. That's a godsend to lots of entrepreneur today. So you see what I suggest now, right, how the employee retention credit has gone from awful duckling in 2020 to lovely swan in 2021, right? And by the way, by the method, qualified earnings includes employer-paid health insurance premiums.


If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to select the finest covered duration that will get you complete PPP forgiveness however likewise optimize your employee retention credit.



Alright, sorry for getting a little sidetracked there, I just love talking about this things, but 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 easier to certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit first, since I got first round of PPP money and 2nd since my service didn't suffer that big 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. Not only are more companies qualified for the employee retention credit thanks to these brand-new laws, making PPP recipients eligible for the employee retention credit though not on the very same earnings and making more services eligible through the 20% decrease limit rather than the 50% decrease limit, but the 2021 credit is also more lucrative than the 2020 credit.

Not bad, but that's nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified earnings per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per worker ... for that entire time period?