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 Works
This is huge, a great deal of small company owners don't understand about this, or they've heard about it, however they don't understand much about it, even numerous tax specialists don't understand the ins and outs of this thing because it's brand-new and a lot of these changesthat are helpful to company owner took place in the middle of tax season. So in this video I'm going to dig into the employee retention credit, why it's so profitable now in 2021, more rewarding, even more rewarding, in fact now than it remained in 2020, 5x more financially rewarding a minimum of. Even if you don't own an organization, be sure to share this video with service owners you know, this video could literally be worth 10s of thousands of dollars for them. And if you are a company owner and after you view 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 e-mail, [email protected], inform me a little about your company and your ballpark year-over-year earnings, and let's see if we can get some more refund in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by reducing your needed employment tax deposits or you can request 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 complexities of that type here or the Form 941 and all the payroll stuff because that's the stuff your CPA must fret about. In this video I wish to inform you what you need to understand so you can go to your CPA and state, "Hey, what about this employee retention credit, why haven't you informed me about this?" so you can be informed and take ownership of your own tax situations, of your organization's tax situation to produce more capital in your service and more wealth for yourself.
About Employee Retention Tax Credit Reinstatement Act
Alright, now let's dig 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 state that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for general educational purposes only, 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 firm as such. Another disclaimer here, for functions of this video I am presuming that if you're enjoying this you are a small business owner, which for employee retention credit purposes indicates one hundred or fewer workers for purposes of the 2020 credit and five hundred or less staff members for purposes of the 2021 credit, if you have a company with over five 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 company owners who may work with a regional tax specialist who is so neck-deep in tax returns today because the government extended the tax due date to May 17 or volume is just the nature of their service that your tax professional hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so rewarding for company owners in 2021 and why weren't we talking about it in 2020, it's been around because then, given that the CARES Act? Yes, the employee retention credit has been around because the CARES Act that was passed over a year ago in March 2020, but the employee retention credit didn't get much love last year in 2020 because of the PPP, the Paycheck Protection Program.
The stimulus costs passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more attractive. Essentially the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular woman with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for service owners in 2021. Why? Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a few factors.
Why Employee Retention Tax Credit Reinstatement Act
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 staff members 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 select the best covered period that will get you full PPP forgiveness but also optimize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll container with as many costs as possible that don't count for employee retention credit purposes. For instance, you can't declare the employee retention credit on state joblessness insurance coverage contributions, however state joblessness insurance contributions count towards PPP forgiveness, see? So you 'd wish to dispose all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much regular incomes as possible to take the employee retention credit on.
So this can get extremely technical very quickly and it's very circumstance particular in regards to optimizing PPP vs. ERC and my firm has tools to figure this things out for you, I'm not going to dig into all that here, but simply know that you actually have to do the math when doing your PPP forgiveness to make sure you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't subtract the earnings you claimed the employee retention credit on, and that makes sense as well, why should the government offer you a reduction for these incomes that they already provided you a credit for? Essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just like discussing this stuff, but let's discuss another reason that the employee retention credit is more appealing now than it was in 2015, which is that it's easier to get approved for the employee retention credit in 2021. In 2020, for a quarter to get approved for the employee retention credit, you had to show a 50% decrease in gross invoices compared to the exact same calendar quarter in 2019.
But in 2021, for a quarter to qualify for the employee retention credit, you only require to reveal a 20% decline in gross invoices compared to the very same calendar quarter in 2019. This implies far more companies will qualify. My company, 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 get approved for the 2020 employee retention credit first, due to the fact that I got first round of PPP money and 2nd due to the fact that my organization 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 business certifies. For 2021, for any quarter, you can choose to utilize the lookback quarter, suggesting that, for example, even if your Q1 2021 gross invoices aren't at least 20% lower than your Q1 2019 gross receipts, 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 get approved for Q1 2021 based upon Q1 2021's gross receipts, you will also qualify for Q2 2021 considering that you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you simply receive Q1 and Q3 2021, you likewise certify for Q2 and Q4 based upon the lookback. Even if you didn't have an enough decline in revenue, you can certify for the employee retention credit if you were needed to completely or partly suspend operations in your service 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 complete or partial shutdown.
Common example, you own a dining establishment, and your governor signed an executive order mentioning that you require to close down indoor dining. That is an example of a partial shutdown. Also, not only are more businesses 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 organizations eligible through the 20% decrease limit rather than the 50% decline limit, but the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified salaries per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per employee ... for that whole time duration? For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in wages per staff member per quarter, so we're talking about an optimum credit of $7,000 per staff member per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per employee.
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 however also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply like talking about this stuff, 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 simpler to qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, since I got very first round of PPP cash and second since my business didn't suffer that large 50% decline needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization qualifies. Not only are more organizations eligible for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the same earnings and making more services eligible through the 20% decline limit rather than the 50% decline threshold, but the 2021 credit is also more financially rewarding than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of qualified earnings per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per worker ... for that entire time period?
How to Get going
That will bargain on behalf of their clients to obtain the ideal rates possible for their existing clients. They will certainly examine old billings for errors getting their clients reimbursements and also tax credits.
Services supplied can include:
Dedicated experts that will certainly interpret very complicated program regulations and also will certainly be offered to answer your inquiries, including:
Just how does the PPP finance factor into the ERC?
What are the differences between the 2020 and 2021 programs and also just how does it relate to your service?
What are gathering policies for bigger, multi-state employers, and how do I translate numerous states executive orders?
Just how do part-time, Union, and tipped employees affect the quantity of my refunds?
Extensive examination regarding your eligibility
Extensive evaluation of your case
Assistance on the claiming process as well as documentation
Certain program proficiency that a normal certified public accountant or payroll processor might not be well-versed in
Smooth and also rapid end-to-end procedure, from qualification to asserting and receiving reimbursements
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Start? Its Simple.
1. Whichever company you select to work with will certainly identify whether your company certifies and gets approvel for the ERC.
2. They will certainly examine your request as well as compute the maximum amount you can obtain.
3. Their team overviews you through the declaring procedure, from beginning to finish, consisting of correct documents.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 and also right on September 30, 2021, for eligible businesses.
You can apply for reimbursements for 2020 and also 2021 after December 31st of this year, right into 2022 and also 2023. And potentially past then also.
Many services have received reimbursements, and also others, in enhancement to refunds, additionally qualified to continue obtaining ERC in every payroll they process to December 31, 2021, at about 30% of their pay-roll cost.
Some services have received reimbursements from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, services can currently qualify for the ERC also if they already got a PPP funding. Note, however, that the ERC will only put on incomes not utilized for the PPP.
maintain a 20% decline in gross invoices .
A federal government authority called for full or partial closure of your company throughout 2020 or 2021. This includes your procedures being restricted by commerce, failure to travel or limitations of team meetings.
- Gross invoice decrease requirements is different for 2020 and also 2021, but is measured versus the present quarter as compared to 2019 pre-COVID quantities:
- A government authority called for full or partial closure of your business throughout 2020 or 2021. This includes your operations being limited by business, lack of ability to take a trip or restrictions of group meetings.
- Gross receipt decrease standards is different for 2020 and also 2021, however is gauged versus the current quarter as compared to 2019 pre-COVID quantities.
Do we still certify if we remained open during the pandemic?
Yes. To certify, your organization must meet either among the complying with requirements:
- Experienced a decrease in gross invoices by 20%, or
- Had to transform company operations due to government orders
Several products are considered as changes in business operations, consisting of shifts in work roles and also the purchase of extra protective tools.