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.
How It Functions
Even if you do not own a company, be sure to share this video with company owners you know, this video might literally be worth tens of thousands of dollars for them. And if you are a service owner and after you view this video you want to talk with me and a member of my team, who will also be either a CPA like myself or an EA, shoot me an email, [email protected], inform me a little about your organization and your ballpark year-over-year income, and let's see if we can get some more cash back in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by lowering your needed employment tax deposits or you can ask for 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 intricacies of that type here or the Form 941 and all the payroll things since that's the things your CPA need to stress about. In this video I wish to tell you what you need to understand so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you told me about this?" so you can be informed and take ownership of your own tax scenarios, of your organization's tax circumstance to create more cash flow in your organization and more wealth on your own.
About Employee Retention Ertc Credit
Alright, now let's go into this and let's talk about the employee retention credit or the ERC as some folks like to call it, before I enter this, I desire to state that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for basic educational purposes only, yes, I am a tax and a certified public accountant expert, however I am not your CPA nor your tax expert unless you have engaged my company as such. Another disclaimer here, for purposes of this video I am presuming that if you're seeing this you are a small company owner, which for employee retention credit purposes means one hundred or less workers for purposes of the 2020 credit and 5 hundred or fewer staff members for functions of the 2021 credit, if you have a business with over five hundred workers I imagine you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small service owners who might deal with a regional tax specialist who is so neck-deep in tax returns today since the federal government extended the tax deadline to May 17 or volume is simply the nature of their company that your tax specialist hasn't had the time to go into the weeds here like I have.
So employee retention credit, why is it so rewarding for entrepreneur in 2021 and why weren't we speaking about it in 2020, it's been around since then, considering that 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 actually been around because 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 since of the PPP, the Paycheck Protection Program. Initially, in 2020, if you got a PPP loan as an employer, you were not eligible for the employee retention credit.
The stimulus expense passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it much more appealing. So generally the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular girl with neglected eyebrows and thick glasses 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 couple of factors.
Why Employee Retention Ertc Credit
Reason, 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 workers and then turn around and declare the employee retention credit on those wages. 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 likewise maximize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll bucket with as numerous expenses as possible that don't count for employee retention credit functions. You can't claim the employee retention credit on state unemployment insurance contributions, however state unemployment insurance contributions count towards PPP forgiveness, see? You 'd desire to dump all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much regular incomes as possible to take the employee retention credit on.
Another thing to note is you can't subtract the wages you declared the employee retention credit on, and that makes sense as well, why should the federal government give you a deduction for these incomes that they already offered you a credit for? Alright, sorry for getting a little sidetracked there, I just 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 simpler to qualify for the employee retention credit in 2021.
In 2021, for a quarter to qualify for the employee retention credit, you only need to reveal a 20% decrease in gross receipts compared to the same calendar quarter in 2019. So this indicates far more organizations will certify. My service, for instance, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
I didn't qualify for the 2020 employee retention credit initially, due to the fact that I got very first round of PPP cash and second because my company didn't suffer that big 50% decrease required to certify 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 choose to use the lookback quarter, implying that, for example, even if your Q1 2021 gross invoices aren't at least 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. Ramification here is that if you qualify for Q1 2021 based upon Q1 2021's gross receipts, you will also get approved for Q2 2021 since you qualified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so basically if you just qualify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decrease in profits, you can qualify for the employee retention credit if you were needed to totally 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 eligible for the employee retention credit throughout that duration of complete or partial shutdown.
Typical example, you own a restaurant, and your governor signed an executive order stating that you require to shut down indoor dining. That is an example of a partial shutdown. Likewise, not only are more organizations qualified for the employee retention credit thanks to these brand-new laws, making PPP receivers qualified for the employee retention credit though not on the same salaries and making more organizations eligible through the 20% decrease limit rather than the 50% decrease limit, 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 earnings for 2020, the employee retention credit amounted to 50% of all qualified wages you paid employees between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in wages for that whole period. The optimum 2020 credit per staff member was $5,000. Okay, however that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equal 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 period? No. Per quarter. So for 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on approximately $10,000 in incomes per employee per quarter, so we're talking about a maximum credit of $7,000 per worker per quarter. $7,000 times 4 is $28,000 if you're eligible all four quarters. That's right, folks, the optimum 2021 employee retention credit is $28,000 per worker. That's big. That's a godsend to lots of company owners today. So you see what I imply now, right, how the employee retention credit has gone from awful duckling in 2020 to gorgeous swan in 2021, right? And by the method, by the method, qualified earnings includes employer-paid health 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 finest 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 appealing 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 certify for the 2020 employee retention credit first, because I got first round of PPP cash and 2nd because my service 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 organization certifies. Not just are more companies qualified for the employee retention credit thanks to these brand-new laws, making PPP receivers qualified for the employee retention credit though not on the exact same earnings and making more organizations eligible through the 20% decrease threshold 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 worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that whole time duration?
How to Start
That will work out on part of their customers to get the finest costs possible for their existing clients. They will investigate old invoices for errors getting their customers reimbursements and also credits.
Assistance offered can include:
Dedicated professionals that will analyze extremely intricate program rules and will be readily available to answer your inquiries, including:
How does the PPP funding factor into the ERC?
What are the differences in between the 2020 and 2021 programs as well as how does it apply to your company?
What are aggregation policies for bigger, multi-state companies, as well as exactly how do I translate several states executive orders?
Exactly how do part-time, Union, and tipped workers affect the quantity of my reimbursements?
Extensive analysis regarding your eligibility
Detailed evaluation of your situation
Assistance on the declaring process and also documentation
Certain program expertise that a normal certified public accountant or pay-roll processor could not be well-versed in
Smooth and also quick end-to-end process, from eligibility to declaring as well as receiving refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Begin? Its Simple.
1. Whichever company you select to work with will establish whether your service qualifies and gets approvel for the ERC.
2. They will certainly evaluate your request and also compute the optimum amount you can receive.
3. Their group overviews you through the asserting procedure, from beginning to finish, including correct documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 as well as ends on September 30, 2021, for qualified organizations.
You can get refunds for 2020 and 2021 after December 31st of this year, into 2022 as well as 2023. And possibly past then as well.
Many organizations have received refunds, and others, in enhancement to reimbursements, likewise qualified to proceed getting ERC in every pay-roll they process to December 31, 2021, at around 30% of their pay-roll cost.
Some companies 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, companies can now get approved for the ERC even if they currently got a PPP financing. Keep in mind, though, that the ERC will only apply to earnings not used for the PPP.
Do we still certify if we did not) sustain a 20% decline in gross billings .
A government authority required partial or complete closure of your company during 2020 or 2021. This includes your procedures being restricted by commerce, inability to take a trip or limitations of group conferences.
- Gross receipt decrease criteria is various for 2020 and also 2021, however is gauged versus the current quarter as contrasted to 2019 pre-COVID quantities:
- A government authority needed complete or partial closure of your business during 2020 or 2021. This includes your operations being limited by business, failure to take a trip or limitations of team meetings.
- Gross receipt decrease criteria is different for 2020 and also 2021, yet is determined versus the existing quarter as compared to 2019 pre-COVID amounts.
Do we still certify if we remained open during the pandemic?
Yes. To certify, your service must satisfy either among the adhering to criteria:
- Experienced a decrease in gross invoices by 20%, or
- Had to transform company procedures as a result of federal government orders
Several items are thought about as changes in organization operations, including shifts in work functions and the purchase of added protective devices.