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.
Exactly How It Works
This is big, a lot of small company owners do not understand about this, or they've become aware of it, but they do not understand much about it, even numerous tax specialists don't know the ins and outs of this thing due to the fact that it's new and a lot of these modificationsthat are beneficial to organization owners occurred in the middle of tax season. So in this video I'm going to dig into the employee retention credit, why it's so profitable now in 2021, more profitable, even more rewarding, in reality now than it was in 2020, 5x more financially rewarding a minimum of. So even if you don't own a business, be sure to share this video with service owners you know, this video might actually be worth 10s of thousands of dollars for them. And if you are an entrepreneur and after you see this video you wish 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 e-mail, [email protected], tell me a little about your business and your ballpark year-over-year earnings, and let's see if we can get some more refund in your pocket because you can take this credit against your payroll taxes you pay by lowering your required employment tax deposits or you can request an advance payment of the credit using IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll stuff because that's the stuff your CPA must stress over. In this video I wish to tell you what you require to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why have not you told me about this?" You can be informed and take ownership of your own tax circumstances, of your service's tax circumstance to create more cash flow in your service and more wealth for yourself.
About Employee Retention Qualifications
Alright, now let's go into this and let's talk about the employee retention credit or the ERC as some folks like to call it, prior to I get into this, I wish to say that nothing in this video is to be taken as legal or tax guidance, this video is for basic informational purposes only, yes, I am a tax and a cpa expert, however I am not your CPA nor your tax expert unless you have actually engaged my firm as such. Another disclaimer here, for purposes of this video I am assuming that if you're enjoying this you are a little business owner, which for employee retention credit purposes implies one hundred or less workers for functions of the 2020 credit and five hundred or fewer staff members for functions of the 2021 credit, if you have a company with over 5 hundred workers I picture you have in-house counsel, in-house CPAs who are on top of this things, but I'm here for you small company owners who may work with a local tax expert who is so neck-deep in income tax return today because the federal government extended the tax due date to May 17 or volume is simply the nature of their organization that your tax specialist hasn't had the time to go into the weeds here like I have.
So employee retention credit, why is it so lucrative for entrepreneur in 2021 and why weren't we discussing it in 2020, it's been around given that then, because the CARES Act? Why is it getting all this buzz now that it wasn't last year? Well, let's back it up. Yes, the employee retention credit has been around since 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 because of the PPP, the Paycheck Protection Program. Originally, in 2020, if you got a PPP loan as an employer, you were not eligible for the employee retention credit.
Basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy woman with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for service owners in 2021. Why is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Qualifications
Very first factor, the employee retention credit for both 2020 and 2021 is now offered to PPP recipients, but obviously 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 earnings. The federal government does not look too fondly on paying your payroll for you through the PPP and then you claiming a credit versus the taxes you pay the federal government on those wages that the federal government paid for you. So that makes sense. Now, there's some preparation here. 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 period that will get you complete PPP forgiveness but also optimize your employee retention credit.
Likewise, for PPP forgiveness, you wish to fill up that payroll pail with as lots of expenses as possible that do not count for employee retention credit functions. You can't claim the employee retention credit on state unemployment insurance contributions, but state joblessness insurance coverage contributions count toward PPP forgiveness, see? So you 'd want to dispose all your state unemployment insurance contributions on your PPP forgiveness application to leave as much common incomes as possible to take the employee retention credit on.
Another thing to note is you can't subtract the wages you declared the employee retention credit on, and that makes sense as well, why should the government give you a reduction for these salaries that they currently provided you a credit for? Alright, sorry for getting a little sidetracked there, I simply love talking about this things, but let's talk about another factor 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.
In 2021, for a quarter to certify for the employee retention credit, you only require to show a 20% decrease in gross invoices compared to the same calendar quarter in 2019. So this indicates far more companies will certify. My business, for instance, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
I didn't qualify for the 2020 employee retention credit first, because I got very first round of PPP money and 2nd because my service didn't suffer that large 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Also, for 2021, for any quarter, you can elect to use the lookback quarter, meaning that, for instance, even if your Q1 2021 gross receipts aren't a minimum of 20% lower than your Q1 2019 gross invoices, you can compare for functions 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 get approved for Q1 2021 based on Q1 2021's gross receipts, you will likewise get approved for Q2 2021 given that you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so generally if you simply get approved for Q1 and Q3 2021, you likewise certify for Q2 and Q4 based on the lookback. Likewise, even if you didn't have a sufficient decrease in profits, you can get approved for the employee retention credit if you were needed to totally or partly suspend operations in your company 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 duration of complete or partial shutdown.
Common example, you own a dining establishment, and your governor signed an executive order specifying that you need to shut down indoor dining. That is an example of a partial shutdown. Likewise, not only are more businesses eligible for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the same incomes and making more services eligible through the 20% decrease threshold rather than the 50% decline threshold, but the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of certified incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per worker ... for that whole time duration? 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 employee per quarter, so we're talking about a maximum credit of $7,000 per employee per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per staff member.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to choose the best covered period that will get you full PPP forgiveness but likewise maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, but 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 simpler to qualify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, because I got first round of PPP cash and 2nd because my company didn't suffer that large 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Not just are more services eligible for the employee retention credit thanks to these brand-new laws, making PPP recipients eligible for the employee retention credit though not on the exact same wages and making more services eligible through the 20% decline limit rather than the 50% decrease limit, however the 2021 credit is likewise more rewarding than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that entire time duration?
How to Start
The most effective means is to deal with a no-risk, contingency-based price financial savings business. That will certainly bargain on behalf of their clients to get the very best rates feasible for their existing clients. They will certainly examine old billings for errors obtaining for their clients refunds as well as tax credits. They can enhance the profitability and also overall valuation of their clients companies.
Solutions supplied can include:
Committed specialists that will translate very complex program policies and also will be available to address your concerns, including:
Exactly how does the PPP loan element into the ERC?
What are the distinctions in between the 2020 and 2021 programs and just how does it put on your service?
What are aggregation policies for bigger, multi-state companies, and also how do I translate numerous states executive orders?
Just how do part-time, Union, and tipped workers influence the amount of my reimbursements?
Thorough assessment regarding your qualification
Comprehensive evaluation of your situation
Advice on the claiming procedure as well as paperwork
Particular program know-how that a normal CPA or payroll cpu may not be well-versed in
Fast as well as smooth end-to-end procedure, from eligibility to declaring and receiving reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Begin? Its Simple.
1. Whichever company you pick to work with will certainly identify whether your service qualifies for the ERC.
2. They will examine your case and calculate the maximum amount you can obtain.
3. Their team guides you through the asserting process, from beginning to end, consisting of proper documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 and ends on September 30, 2021, for eligible businesses.
You can look for reimbursements for 2020 as well as 2021 after December 31st of this year, into 2022 as well as 2023. And potentially beyond then also.
Many businesses have received refunds, and also others, along with refunds, likewise qualified to proceed getting ERC in every pay-roll they process to December 31, 2021, at around 30% of their pay-roll expense.
Some businesses have gotten refunds from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can now qualify for the ERC also if they currently received a PPP funding. Note, though, that the ERC will only relate to salaries not utilized for the PPP.
Do we still certify if we did not incur a 20% decrease in gross invoices .
A federal government authority needed partial or full shutdown of your company throughout 2020 or 2021. This includes your operations being limited by business, failure to travel or limitations of team meetings.
- Gross invoice decrease standards is different for 2020 and 2021, however is gauged against the existing quarter as compared to 2019 pre-COVID quantities:
- A government authority required partial or complete shutdown of your business during 2020 or 2021. This includes your procedures being restricted by commerce, failure to take a trip or restrictions of group conferences.
- Gross invoice reduction requirements is different for 2020 and 2021, but is measured versus the existing quarter as contrasted to 2019 pre-COVID amounts.
Do we still certify if we continued to be open during the pandemic?
Yes. To certify, your business has to meet either one of the following standards:
- Experienced a decline in gross receipts by 20%, or
- Had to alter service procedures due to government orders
Lots of products are taken into consideration as modifications in organization procedures, including shifts in job roles as well as the purchase of extra protective equipment.