Why Employee Retention Program

First reason, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, however naturally you can't double dip. You can't get PPP for the hundred thousand dollars you paid your workers and after that turn around and declare the employee retention credit on those incomes too. The federal 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 incomes that the federal government spent for you. 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 require to select the finest covered period that will get you complete PPP forgiveness but also optimize your employee retention credit.



For PPP forgiveness, you want to fill up that payroll pail with as many costs as possible that don't 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 contributions count toward PPP forgiveness, see? You 'd want to discard all your state unemployment insurance contributions on your PPP forgiveness application to leave as much common incomes as possible to take the employee retention credit on.

This can get extremely technical very quickly and it's very circumstance particular in terms of optimizing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to dig into all that here, but just know that you really have to do the math when doing your PPP forgiveness to make sure you're not leaving anything on the table in terms of the employee retention credit. Another thing to note is you can't subtract the wages you declared the employee retention credit on, and that makes good sense too, why should the government provide you a reduction for these incomes that they currently offered you a credit for? Basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply enjoy speaking about this stuff, but let's talk about another factor why the employee retention credit is more attractive now than it was in 2015, which is that it's easier to certify for the employee retention credit in 2021. In 2020, for a quarter to receive the employee retention credit, you had to show a 50% decrease in gross receipts compared to the same calendar quarter in 2019.

In 2021, for a quarter to qualify for the employee retention credit, you only require to show a 20% decrease in gross invoices compared to the very same calendar quarter in 2019. So this implies much more organizations will certify. My business, for example, 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, since I got very first round of PPP cash and 2nd due to the fact that my company didn't suffer that large 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Also, for 2021, for any quarter, you can elect to utilize 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 receipts, you can compare for functions of determining eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Ramification here is that if you get approved for Q1 2021 based upon Q1 2021's gross invoices, you will also certify for Q2 2021 because you qualified in the lookback quarter of Q1 2021.

Exact same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just qualify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Also, even if you didn't have a sufficient decline in income, you can qualify for the employee retention credit if you were required to totally or partially suspend operations in your organization 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 duration of full or partial shutdown.

Typical example, you own a dining establishment, and your governor signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Likewise, not just are more businesses 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 salaries and making more organizations eligible through the 20% decrease limit instead of the 50% decline threshold, however the 2021 credit is also more profitable than the 2020 credit.

This is since for 2020, the employee retention credit amounted to 50% of all qualified salaries for 2020, the employee retention credit amounted to 50% of all certified earnings you paid staff members in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in incomes for that whole period. The optimum 2020 credit per employee was $5,000. Okay, but that's absolutely nothing compared to the 2021 credit since for 2021, the credit amounts to 70% of certified earnings per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per worker ... for that entire period? No. Per quarter. So for 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in wages per worker per quarter, so we're talking about a maximum credit of $7,000 per staff member per quarter. $7,000 times four is $28,000 if you're eligible all four quarters. That's right, folks, the optimum 2021 employee retention credit is $28,000 per employee. That's substantial. That's a blessing to lots of entrepreneur right now. You see what I imply now, right, how the employee retention credit has gone from awful duckling in 2020 to stunning swan in 2021? And by the way, by the way, qualified salaries consists of employer-paid health insurance coverage premiums.


If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to pick 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 enjoy talking about this stuff, 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 certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit first, because I got first round of PPP money and 2nd since my service 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 business qualifies. Not only are more companies 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 same earnings and making more organizations eligible through the 20% decline limit rather than the 50% decrease limit, however the 2021 credit is likewise more lucrative than the 2020 credit.

Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of certified earnings per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per employee ... for that entire time period?