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 Functions
This is big, a lot of small company owners don't learn about this, or they've found out about it, however they don't know much about it, even many tax specialists don't know the ins and outs of this thing because it's new and a lot of these modificationsthat are beneficial to business owners took place in the middle of tax season. In this video I'm going to dig into the employee retention credit, why it's so financially rewarding now in 2021, more lucrative, far more lucrative, in fact now than it was in 2020, 5x more lucrative at least. So even if you do not own a service, be sure to share this video with company owner you understand, this video might literally deserve 10s of thousands of dollars for them. And if you are a company owner and after you enjoy this video you wish to talk with me and a member of my team, who will likewise be either a CPA like myself or an EA, shoot me an email, [email protected], tell me a little about your company and your ballpark year-over-year income, and let's see if we can get some more money back in your pocket because you can take this credit against your payroll taxes you pay by lowering your needed employment tax deposits or you can ask for an advance payment of the credit using IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Since that's the stuff your CPA should worry about, I am not going to get into the intricacies of that type here or the Form 941 and all the payroll stuff. In this video I wish to tell you what you need to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you informed me about this?" so you can be notified and take ownership of your own tax scenarios, of your organization's tax situation to generate more cash circulation in your business and more wealth for yourself.
About Employee Retention Ertc Credit
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 desire to say that nothing in this video is to be taken as legal or tax guidance, this video is for basic educational functions only, yes, I am a tax and a certified public accountant professional, but I am not your CPA nor your tax professional unless you have engaged my firm. Another disclaimer here, for functions of this video I am assuming that if you're enjoying this you are a small organization owner, which for employee retention credit purposes suggests one hundred or fewer employees for functions of the 2020 credit and 5 hundred or less employees for purposes of the 2021 credit, if you have a company with over 5 hundred workers 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 may deal with a regional tax expert who is so neck-deep in income tax return right now because the federal government extended the tax deadline to May 17 or volume is just the nature of their business that your tax expert hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so lucrative for business owners in 2021 and why weren't we talking about it in 2020, it's been around because then, given that the CARES Act? Yes, the employee retention credit has been around considering that the CARES Act that was passed over a year ago in March 2020, but 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 expense 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. So basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy woman with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for service owners in 2021. Why? Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a couple of reasons.
Why Employee Retention Ertc Credit
Factor, the employee retention credit for both 2020 and 2021 is now offered to PPP recipients, however of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your staff members and then turn around and declare the employee retention credit on those wages. If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to choose the best covered duration that will get you full PPP forgiveness but also maximize your employee retention credit.
Also, for PPP forgiveness, you want to fill that payroll container with as lots of expenses as possible that do not count for employee retention credit functions. For instance, you can't declare the employee retention credit on state unemployment insurance contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd want to discard all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much regular incomes as possible to take the employee retention credit on.
Another thing to note is you can't deduct the salaries you claimed the employee retention credit on, and that makes sense as well, why should the federal government offer you a deduction for these earnings that they already provided you a credit for? Alright, sorry for getting a little sidetracked there, I simply enjoy talking about this things, however let's talk about another factor why the employee retention credit is more appealing now than it was last year, and that is that it's much easier to qualify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you just need to reveal a 20% reduction in gross receipts compared to the exact same calendar quarter in 2019. This implies far more services will certify. My organization, for instance, 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 receive the 2020 employee retention credit first, due to the fact that I got very first round of PPP money and 2nd since my service didn't suffer that large 50% decline required to receive the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my organization qualifies. Likewise, for 2021, for any quarter, you can elect to use the lookback quarter, implying that, for instance, 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 identifying eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Ramification here is that if you qualify for Q1 2021 based on Q1 2021's gross invoices, you will also receive Q2 2021 because you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so generally if you simply certify for Q1 and Q3 2021, you likewise certify for Q2 and Q4 based upon the lookback. Even if you didn't have a sufficient decline in profits, you can qualify for the employee retention credit if you were needed 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 throughout that period of complete or partial shutdown.
Typical example, you own a dining establishment, and your governor signed an executive order mentioning that you need to shut down indoor dining. That is an example of a partial shutdown. Also, not just are more companies qualified 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 incomes and making more services eligible through the 20% decrease limit instead of the 50% decrease threshold, but the 2021 credit is also more rewarding than the 2020 credit.
This is since for 2020, the employee retention credit amounted to 50% of all qualified wages for 2020, the employee retention credit was equivalent to 50% of all qualified salaries you paid employees between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in earnings for that entire time period. The optimum 2020 credit per employee was $5,000. Okay, however that's nothing compared to the 2021 credit because for 2021, the credit amounts to 70% of qualified wages per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per worker ... for that entire time duration? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in wages per worker per quarter, so we're discussing an optimum 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 optimum 2021 employee retention credit is $28,000 per worker. That's huge. That's a godsend to numerous entrepreneur right now. You see what I suggest now, right, how the employee retention credit has gone from ugly duckling in 2020 to stunning swan in 2021? And by the method, by the way, certified earnings consists of employer-paid health insurance coverage premiums.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to pick 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 simply love talking about this stuff, 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 much easier to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, due to the fact that I got first round of PPP money and 2nd because my business didn't suffer that large 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company certifies. Not only are more organizations 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 same salaries and making more companies eligible through the 20% decrease limit rather than the 50% decrease limit, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of certified salaries per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per staff member ... for that entire time period?
How to Begin
That will certainly negotiate on behalf of their clients to obtain the best costs possible for their existing clients. They will certainly investigate old invoices for mistakes obtaining their clients refunds and also tax credits.
Services supplied can include:
Devoted experts that will certainly interpret extremely complicated program policies and will certainly be readily available to address your questions, including:
Exactly how does the PPP financing factor into the ERC?
What are the differences between the 2020 as well as 2021 programs as well as how does it put on your company?
What are gathering rules for larger, multi-state companies, and also how do I interpret numerous states executive orders?
How do part-time, Union, and also tipped employees impact the amount of my reimbursements?
Comprehensive examination regarding your qualification
Extensive evaluation of your case
Guidance on the claiming procedure as well as documentation
Certain program competence that a normal certified public accountant or payroll cpu might not be well-versed in
Fast as well as smooth end-to-end process, from qualification to declaring and also getting reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Get Going? Its Simple.
1. Whichever firm you select to work with will certainly identify whether your organization qualifies and gets approvel for the ERC.
2. They will certainly analyze your request and also compute the maximum amount you can get.
3. Their team guides you through the declaring procedure, from starting to end, consisting of appropriate documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 as well as right on September 30, 2021, for eligible organizations.
You can obtain refunds for 2020 as well as 2021 after December 31st of this year, right into 2022 and 2023. And also potentially past after that too.
Many organizations have received refunds, as well as others, along with reimbursements, also qualified to continue getting ERC in every payroll they process through December 31, 2021, at close to 30% of their payroll expense.
Some services have actually gotten refunds from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now get the ERC even if they already obtained a PPP financing. Keep in mind, though, that the ERC will just use to earnings not used for the PPP.
Do we still accredit if we did not sustain a 20% decline in gross invoices .
A federal government authority needed complete or partial closure of your service throughout 2020 or 2021. This includes your procedures being restricted by commerce, inability to travel or limitations of group conferences.
- Gross receipt decrease criteria is various for 2020 and 2021, however is determined against the existing quarter as compared to 2019 pre-COVID quantities:
- A government authority required partial or full closure of your business throughout 2020 or 2021. This includes your operations being restricted by commerce, inability to take a trip or limitations of team meetings.
- Gross receipt reduction criteria is different for 2020 and 2021, but is gauged versus the present quarter as contrasted to 2019 pre-COVID quantities.
Do we still qualify if we continued to be open during the pandemic?
Yes. To qualify, your organization should satisfy either one of the following criteria:
- Experienced a decrease in gross receipts by 20%, or
- Had to change organization operations due to federal government orders
Several items are taken into consideration as adjustments in business operations, including changes in job functions and also the acquisition of additional safety tools.