Why Employee Retention 2020 Ertc Qualifications

Factor, the employee retention credit for both 2020 and 2021 is now offered to PPP recipients, 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 claim 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 require to choose the finest covered period that will get you full PPP forgiveness but also maximize your employee retention credit.



For PPP forgiveness, you want to fill up that payroll pail with as lots of costs as possible that don't count for employee retention credit functions. For example, you can't declare the employee retention credit on state joblessness insurance coverage contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd wish to dump all your state joblessness insurance contributions on your PPP forgiveness application to leave as much normal earnings as possible to take the employee retention credit on.

So this can get very technical really quick and it's really situation particular in regards to optimizing PPP vs. ERC and my firm has tools to figure this stuff out for you, I'm not going to dig into all that here, but simply know that you actually have to do the mathematics when doing your PPP forgiveness to make certain you're not leaving anything on the table in terms of the employee retention credit. Another thing to note is you can't deduct the incomes you declared the employee retention credit on, which makes good sense as well, why should the government give you a reduction for these earnings that they currently provided you a credit for? So basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just love speaking about this stuff, but let's talk about another reason the employee retention credit is more attractive now than it was in 2015, and that is that it's much easier to certify for the employee retention credit in 2021. In 2020, for a quarter to get approved for the employee retention credit, you had to reveal a 50% decrease in gross receipts compared to the exact same calendar quarter in 2019.

In 2021, for a quarter to certify for the employee retention credit, you only need to reveal a 20% decrease in gross invoices compared to the same calendar quarter in 2019. This implies far more companies will qualify. My service, for example, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.

I didn't qualify for the 2020 employee retention credit initially, since I got 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 certifies. For 2021, for any quarter, you can elect to utilize 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 identifying 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 receive Q2 2021 given that you qualified in the lookback quarter of Q1 2021.

Very same thing for Q2 to Q3 and Q3 to Q4, so basically if you just certify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based upon the lookback. Even if you didn't have a sufficient decline in earnings, you can certify for the employee retention credit if you were required to totally or partially suspend operations in your organization during 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 partial or complete shutdown.

Typical example, you own a restaurant, and your governor signed an executive order mentioning that you require to close down indoor dining. That is an example of a partial shutdown. 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 same incomes and making more businesses eligible through the 20% decline threshold rather than the 50% decrease limit, but the 2021 credit is also more profitable than the 2020 credit.

This is since for 2020, the employee retention credit was equivalent to 50% of all certified wages for 2020, the employee retention credit was equivalent to 50% of all certified wages you paid workers between March 12, 2020, and December 31, 2020, with a limit of $10,000 in earnings for that whole period. So the maximum 2020 credit per staff member was $5,000. Not bad, but that's absolutely 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, restricted to $10,000 in salaries per employee ... for that entire 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 employee per quarter, so we're talking about a maximum credit of $7,000 per staff member per quarter. $7,000 times four is $28,000 if you're eligible all four quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's substantial. That's a blessing to many entrepreneur 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 wages 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 need to select the best covered duration that will get you complete PPP forgiveness however also optimize your employee retention credit.



Alright, sorry for getting a little sidetracked there, I simply enjoy talking about this stuff, 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 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 due to the fact that my organization 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 certifies. Not just are more organizations qualified for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the exact same salaries and making more services eligible through the 20% decrease limit rather than the 50% decrease threshold, however the 2021 credit is also more financially rewarding than the 2020 credit.

Not bad, but that's nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified earnings per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that whole time duration?