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
This is big, a great deal of small organization owners don't understand about this, or they've become aware of it, but they do not know much about it, even lots of tax specialists do not know the ins and outs of this thing due to the fact that it's new and a lot of these changesthat are helpful to entrepreneur took place in the middle of tax season. In this video I'm going to dig into the employee retention credit, why it's so financially rewarding now in 2021, more financially rewarding, far more lucrative, in truth now than it was in 2020, 5x more lucrative at least. So even if you don't own a business, be sure to share this video with entrepreneur you understand, this video could actually deserve 10s of countless dollars for them. And if you are an organization owner and after you watch this video you want 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 email, [email protected], inform me a little about your company and your ballpark year-over-year income, and let's see if we can get some more money back in your pocket because you can take this credit versus your payroll taxes you pay by reducing your required work tax deposits or you can request an advance payment of the credit utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
I am not going to get into the complexities of that type here or the Form 941 and all the payroll stuff since that's the stuff your CPA should stress about. In this video I wish to inform you what you need to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why haven't you told me about this?" You can be notified and take ownership of your own tax circumstances, of your organization's tax situation to generate more money circulation in your company and more wealth for yourself.
About Employee Retention Credit Irs
Alright, now let's dig into this and let's discuss the employee retention credit or the ERC as some folks like to call it, prior to I enter this, I want to state that absolutely nothing in this video is to be taken as legal or tax guidance, this video is for basic informational purposes just, yes, I am a CPA and a tax expert, however I am not your CPA nor your tax expert unless you have actually engaged my company as such. Another disclaimer here, for functions of this video I am assuming that if you're enjoying this you are a small company owner, which for employee retention credit purposes indicates one hundred or less staff members for purposes of the 2020 credit and five hundred or fewer staff members for functions of the 2021 credit, if you have a business with over 5 hundred workers I imagine you have in-house counsel, in-house CPAs who are on top of this things, but I'm here for you small business owners who might deal with a local tax specialist who is so neck-deep in income tax return right now due to the fact that the government extended the tax deadline to May 17 or volume is just the nature of their company that your tax expert hasn't had the time to go into the weeds here like I have.
So employee retention credit, why is it so lucrative for service owners in 2021 and why weren't we talking about it in 2020, it's been around considering 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 given 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 because of the PPP, the Paycheck Protection Program. Originally, in 2020, if you got a PPP loan as an employer, you were not qualified for the employee retention credit.
Essentially the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy girl with unkempt eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for business 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 Credit Irs
Reason, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, 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 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 need to choose the best covered period that will get you complete PPP forgiveness but also maximize your employee retention credit.
Also, for PPP forgiveness, you desire to fill that payroll pail with as numerous expenses as possible that do not count for employee retention credit purposes. For example, you can't declare the employee retention credit on state joblessness insurance coverage contributions, but state joblessness insurance coverage contributions count towards PPP forgiveness, see? So you 'd desire to dump all your state joblessness insurance contributions on your PPP forgiveness application to leave as much common salaries as possible to take the employee retention credit on.
Another thing to note is you can't deduct the incomes you claimed the employee retention credit on, and that makes sense as well, why should the federal government give you a deduction for these earnings that they already provided you a credit for? Alright, sorry for getting a little sidetracked there, I simply enjoy 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 simpler to qualify for the employee retention credit in 2021.
But in 2021, for a quarter to receive the employee retention credit, you only need to show a 20% decrease in gross receipts compared to the same calendar quarter in 2019. This implies far more businesses will certify. My organization, for instance, 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 certify for the 2020 employee retention credit initially, since I got very first round of PPP money and 2nd since my business didn't suffer that large 50% decrease required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. For 2021, for any quarter, you can choose to utilize the lookback quarter, meaning 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. Implication here is that if you certify for Q1 2021 based upon Q1 2021's gross receipts, you will also receive Q2 2021 given that you qualified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so basically if you just certify for Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based upon the lookback. Likewise, even if you didn't have a sufficient decrease in revenue, you can receive the employee retention credit if you were required to completely or partially suspend operations in your company throughout any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are qualified for the employee retention credit during that period of partial or full shutdown.
Common example, you own a restaurant, and your governor signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. 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 same salaries and making more companies eligible through the 20% decrease limit rather than the 50% decrease limit, but the 2021 credit is also more rewarding than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of qualified incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per employee ... for that whole time period? 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 an optimum 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 require to choose the finest covered duration that will get you full PPP forgiveness but likewise maximize 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 factor why the employee retention credit is more attractive now than it was last year, and that is that it's simpler to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, because I got very first round of PPP money and second due to the fact that my business didn't suffer that big 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. Not only 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 very same wages and making more services eligible through the 20% decrease limit rather than the 50% decrease limit, but the 2021 credit is also more rewarding than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of certified earnings per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per staff member ... for that whole time period?
Exactly How to Begin
That will certainly negotiate on part of their clients to get the ideal rates possible for their existing customers. They will certainly audit old invoices for mistakes getting their customers reimbursements and also tax credits.
Assistance provided can include:
Dedicated specialists that will certainly translate extremely complicated program rules and also will be offered to address your inquiries, including:
Exactly how does the PPP finance element into the ERC?
What are the distinctions between the 2020 and 2021 programs and also exactly how does it relate to your company?
What are aggregation regulations for larger, multi-state companies, as well as how do I analyze multiple states executive orders?
Just how do part-time, Union, as well as tipped employees impact the amount of my reimbursements?
Extensive evaluation concerning your eligibility
Extensive analysis of your claim
Assistance on the claiming procedure and documents
Specific program expertise that a regular certified public accountant or pay-roll cpu may not be well-versed in
Quick as well as smooth end-to-end procedure, from qualification to asserting and also getting reimbursements
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|Finance Pro Plus
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Ready To Obtain Started? Its Simple.
1. Whichever firm you pick to work with will certainly figure out whether your service certifies for the ERC.
2. They will analyze your case and compute the optimum amount you can obtain.
3. Their group overviews you with the claiming process, from starting to end, consisting of proper paperwork.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 as well as right on September 30, 2021, for qualified organizations.
You can make an application for refunds for 2020 and also 2021 after December 31st of this year, right into 2022 and also 2023. And also potentially beyond after that also.
Many companies have received reimbursements, as well as others, in addition to refunds, also certified to continue obtaining ERC in every pay-roll they process through December 31, 2021, at around 30% of their pay-roll cost.
Some services have gotten reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can currently certify for the ERC also if they already obtained a PPP funding. Keep in mind, though, that the ERC will just apply to earnings not made use of for the PPP.
Do we still qualify if we did not) incur a 20% decline in gross billings .
A federal government authority needed complete or partial shutdown of your company throughout 2020 or 2021. This includes your procedures being restricted by commerce, inability to travel or constraints of group meetings.
- Gross receipt reduction criteria is different for 2020 as well as 2021, yet is gauged against the current quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority called for full or partial closure of your company throughout 2020 or 2021. This includes your operations being restricted by business, lack of ability to take a trip or restrictions of group conferences.
- Gross receipt decrease criteria is various for 2020 and 2021, however is gauged versus the present quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we remained open during the pandemic?
Yes. To certify, your service has to meet either one of the complying with requirements:
- Experienced a decrease in gross receipts by 20%, or
- Needed to transform service procedures as a result of federal government orders
Numerous items are taken into consideration as modifications in service operations, including changes in work functions as well as the acquisition of extra protective tools.