Why Employee Retention Credit 2020

Reason, the employee retention credit for both 2020 and 2021 is now offered 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 qualified for the employee retention credit, then when you do your PPP forgiveness application, you need to pick the best covered period that will get you full PPP forgiveness but also optimize your employee retention credit.



Also, for PPP forgiveness, you wish to fill that payroll container with as numerous 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, however state joblessness insurance contributions count towards PPP forgiveness, see? You 'd want to discard all your state joblessness insurance contributions on your PPP forgiveness application to leave as much common wages as possible to take the employee retention credit on.

Another thing to note is you can't deduct the earnings you declared the employee retention credit on, and that makes sense as well, why should the 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 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 much easier to certify for the employee retention credit in 2021.

In 2021, for a quarter to qualify for the employee retention credit, you only require to reveal a 20% reduction in gross receipts compared to the exact same calendar quarter in 2019. So this means much more businesses will certify. My service, for example, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.

So I didn't get approved for the 2020 employee retention credit first, due to the fact that I got preliminary of PPP money and 2nd because my company didn't suffer that big 50% decrease needed to certify for the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my business qualifies. Also, for 2021, for any quarter, you can elect to utilize the lookback quarter, meaning that, for instance, 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 determining eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you certify for Q1 2021 based upon Q1 2021's gross receipts, you will likewise get approved for Q2 2021 because you qualified in the lookback quarter of Q1 2021.

Same thing for Q2 to Q3 and Q3 to Q4, so basically if you just get approved for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Even if you didn't have a sufficient decline in revenue, you can certify for the employee retention credit if you were needed to completely 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 throughout that duration of partial or full shutdown.

Typical example, you own a restaurant, and your guv signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Also, not just are more services eligible for the employee retention credit thanks to these new laws, making PPP recipients eligible 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% decline limit, however the 2021 credit is likewise more financially 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 qualified incomes per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per staff member ... 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 wages per employee per quarter, so we're talking about a maximum credit of $7,000 per worker 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 need to choose the best covered period that will get you full PPP forgiveness but likewise optimize your employee retention credit.



Alright, sorry for getting a little sidetracked there, I just like talking about this things, 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 qualify for the 2020 employee retention credit initially, due to the fact that I got first round of PPP cash and second since my organization didn't suffer that big 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization qualifies. Not only are more companies eligible 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 wages and making more businesses eligible through the 20% decrease threshold rather than the 50% decline threshold, however the 2021 credit is also more lucrative 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 certified incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that entire time period?