Why Employee Retention 2021 Erc Calculation

Very first factor, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, however 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 wages. The government doesn't look too fondly on paying your payroll for you through the PPP and after that you claiming a credit versus the taxes you pay the government on those salaries that the government paid for you. So that makes sense. Now, there's some preparation 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 select the very best covered duration that will get you full PPP forgiveness however also maximize your employee retention credit.



For PPP forgiveness, you desire to fill up that payroll container with as numerous costs as possible that do not count for employee retention credit functions. For example, you can't claim the employee retention credit on state joblessness insurance contributions, but state joblessness insurance coverage contributions count toward PPP forgiveness, see? You 'd want to dump all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much normal wages as possible to take the employee retention credit on.

Another thing to note is you can't subtract the incomes you claimed the employee retention credit on, and that makes sense as well, why should the federal government provide you a deduction for these earnings that they already offered you a credit for? Alright, sorry for getting a little sidetracked there, I simply love talking about this things, 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.

However in 2021, for a quarter to qualify 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. So this indicates even more services will certify. My service, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.

I didn't certify for the 2020 employee retention credit first, since I got very first round of PPP cash and 2nd since my service didn't suffer that large 50% decrease needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Also, for 2021, for any quarter, you can choose to use the lookback quarter, meaning that, for instance, even if your Q1 2021 gross invoices aren't a minimum of 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 receipts, you will likewise qualify for Q2 2021 considering that you qualified 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 get approved for Q2 and Q4 based on the lookback. Even if you didn't have an enough decrease in profits, you can certify for the employee retention credit if you were needed to fully or partially suspend operations in your business 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 partial or full 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 just are more organizations qualified for the employee retention credit thanks to these brand-new laws, making PPP receivers eligible for the employee retention credit though not on the exact same earnings and making more services eligible through the 20% decrease limit instead of the 50% decline threshold, however the 2021 credit is likewise more profitable than the 2020 credit.

This is because for 2020, the employee retention credit was equivalent to 50% of all certified incomes for 2020, the employee retention credit amounted to 50% of all certified incomes you paid staff members in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in earnings for that entire time period. The maximum 2020 credit per staff member was $5,000. Not bad, however that's absolutely nothing compared to the 2021 credit since for 2021, the credit amounts to 70% of certified wages per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per employee ... for that whole time period? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in salaries per employee per quarter, so we're talking about a maximum credit of $7,000 per worker per quarter. $7,000 times four is $28,000 if you're qualified all 4 quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's huge. That's a blessing to lots of company owner right now. So you see what I suggest now, right, how the employee retention credit has gone from unsightly duckling in 2020 to stunning swan in 2021, right? And by the method, by the way, qualified wages 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 require to choose the best covered period that will get you full PPP forgiveness however likewise maximize your employee retention credit.



Alright, sorry for getting a little sidetracked there, I simply like 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 easier to qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, due to the fact that I got very first round of PPP money and 2nd due to the fact that my business didn't suffer that large 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Not just are more companies 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 wages and making more businesses eligible through the 20% decline threshold rather than the 50% decline limit, but the 2021 credit is also more profitable 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 wages per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per worker ... for that whole time duration?