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 Functions
Even if you do not own a service, be sure to share this video with organization owners you know, this video could literally be worth tens of thousands of dollars for them. And if you are an organization owner and after you watch this video you desire to talk with me and a member of my group, who will also 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 revenue, and let's see if we can get some more cash back in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by lowering your required work 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.
I am not going to get into the intricacies of that type here or the Form 941 and all the payroll things since that's the stuff your CPA should fret about. In this video I wish to inform 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 told me about this?" You can be notified and take ownership of your own tax situations, of your business's tax situation to produce more money flow in your service and more wealth for yourself.
About Employee Retention Tax Credit 2020
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, before I get into this, I wish to say that absolutely nothing in this video is to be taken as legal or tax advice, this video is for basic informational functions just, yes, I am a CPA and a tax expert, but I am not your CPA nor your tax professional unless you have actually engaged my firm as such. Another disclaimer here, for functions of this video I am presuming 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 purposes of the 2020 credit and 5 hundred or fewer workers for purposes of the 2021 credit, if you have a business 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 might deal with a regional tax professional who is so neck-deep in tax returns right now because the federal government extended the tax due date to May 17 or volume is simply the nature of their business that your tax specialist hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so lucrative for organization owners in 2021 and why weren't we talking about it in 2020, it's been around considering that 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, however the employee retention credit didn't get much love last year in 2020 since of the PPP, the Paycheck Protection Program.
Basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy woman with unkempt 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 attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Tax Credit 2020
Factor, the employee retention credit for both 2020 and 2021 is now readily available to PPP receivers, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your workers and then turn around and declare the employee retention credit on those earnings. 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 finest covered period that will get you complete PPP forgiveness however likewise optimize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as many expenses as possible that do not count for employee retention credit purposes. For instance, you can't declare the employee retention credit on state joblessness insurance coverage contributions, however state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd wish to dispose all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much normal salaries as possible to take the employee retention credit on.
Another thing to note is you can't deduct the wages you claimed the employee retention credit on, and that makes sense as well, why should the federal government provide you a deduction for these incomes that they already gave you a credit for? Alright, sorry for getting a little sidetracked there, I just enjoy talking about this stuff, but let's talk about another reason why the employee retention credit is more appealing now than it was last year, and that is that it's easier to certify for the employee retention credit in 2021.
However in 2021, for a quarter to get approved for the employee retention credit, you only need to show a 20% reduction in gross receipts compared to the same calendar quarter in 2019. This suggests far more businesses will qualify. My business, for instance, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.
So I didn't qualify for the 2020 employee retention credit initially, because I got first round of PPP money and 2nd since my business didn't suffer that big 50% decline required to certify for the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my business certifies. For 2021, for any quarter, you can elect to use the lookback quarter, indicating that, for example, even if your Q1 2021 gross receipts 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 receive Q1 2021 based on Q1 2021's gross invoices, you will also get approved for Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply get approved for Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based upon the lookback. Even if you didn't have a sufficient decrease in earnings, you can certify for the employee retention credit if you were required to fully or partly suspend operations in your organization throughout any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are eligible for the employee retention credit during that duration of complete or partial shutdown.
Typical example, you own a restaurant, and your governor signed an executive order mentioning that you require to shut down indoor dining. That is an example of a partial shutdown. Likewise, not just are more services eligible for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the same earnings and making more services eligible through the 20% decrease threshold instead of the 50% decrease limit, however the 2021 credit is likewise more rewarding than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified wages per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages 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 staff member per quarter, so we're talking about an optimum credit of $7,000 per employee per quarter. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker.
If you got PPP and you are qualified 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 full PPP forgiveness however likewise maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just enjoy talking about this stuff, however 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 easier to qualify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, since I got first round of PPP money and 2nd since my company didn't suffer that big 50% decrease needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my service qualifies. Not just are more businesses qualified for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the very same incomes and making more businesses eligible through the 20% decrease threshold rather than the 50% decrease limit, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified wages per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per staff member ... for that entire time duration?
Exactly How to Start
That will discuss on behalf of their clients to obtain the best costs possible for their existing clients. They will examine old billings for errors getting their clients refunds and also credits.
Assistance offered can include:
Devoted professionals that will translate extremely complex program regulations and will certainly be offered to address your inquiries, including:
Exactly how does the PPP loan aspect right into the ERC?
What are the differences between the 2020 as well as 2021 programs and just how does it relate to your service?
What are aggregation guidelines for larger, multi-state companies, as well as how do I translate numerous states executive orders?
Exactly how do part-time, Union, and also tipped staff members influence the quantity of my refunds?
Extensive analysis regarding your eligibility
Detailed analysis of your case
Guidance on the declaring process as well as paperwork
Certain program expertise that a routine certified public accountant or payroll processor could not be well-versed in
Quick and smooth end-to-end procedure, from qualification to declaring and getting refunds
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Ready To Get Begun? Its Simple.
1. Whichever company you select to work with will certainly figure out whether your business certifies for the ERC.
2. They will certainly examine your request as well as compute the optimum quantity you can get.
3. Their group overviews you via the asserting procedure, from beginning to finish, including correct paperwork.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 and also right on September 30, 2021, for eligible companies.
You can apply for reimbursements for 2020 as well as 2021 after December 31st of this year, into 2022 as well as 2023. As well as potentially beyond then as well.
Many organizations have received reimbursements, and also others, along with refunds, likewise qualified to continue receiving ERC in every pay-roll they refine to December 31, 2021, at around 30% of their payroll expense.
Some companies have actually received reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, businesses can now get the ERC even if they already received a PPP loan. Keep in mind, however, that the ERC will only apply to earnings not utilized for the PPP.
Do we still certify if we did not) sustain a 20% decline in gross receipts .
A government authority called for partial or complete closure of your service during 2020 or 2021. This includes your procedures being limited by business, lack of ability to travel or constraints of team meetings.
- Gross invoice decrease requirements is different for 2020 as well as 2021, yet is gauged versus the existing quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority required complete or partial closure of your service throughout 2020 or 2021. This includes your procedures being restricted by business, failure to travel or restrictions of group conferences.
- Gross receipt reduction requirements is various for 2020 as well as 2021, however is determined against the current quarter as compared to 2019 pre-COVID quantities.
Do we still certify if we continued to be open during the pandemic?
Yes. To certify, your business must meet either one of the adhering to requirements:
- Experienced a decrease in gross receipts by 20%, or
- Had to transform service procedures because of federal government orders
Many products are considered as adjustments in service procedures, including changes in work duties as well as the acquisition of additional safety equipment.