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.
Just how It Functions
This is huge, a great deal of small company owners do not understand about this, or they've heard about it, but they don't understand much about it, even lots of tax specialists don't know the ins and outs of this thing due to the fact that it's new and a great deal of these modificationsthat are helpful to service owners happened in the middle of tax season. So in this video I'm going to go into the employee retention credit, why it's so lucrative now in 2021, more rewarding, even more lucrative, in truth now than it remained in 2020, 5x more profitable at least. So even if you don't own a service, make certain to share this video with entrepreneur you understand, this video might actually deserve 10s of countless dollars for them. And if you are an organization 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], tell me a little about your organization and your ballpark year-over-year income, and let's see if we can get some more refund in your pocket due to the fact that you can take this credit against your payroll taxes you pay by minimizing your needed 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.
Since that's the stuff your CPA must fret about, I am not going to get into the complexities of that form here or the Form 941 and all the payroll stuff. In this video I desire to inform you what you require 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 scenarios, of your service's tax circumstance to create more capital in your business and more wealth for yourself.
About Employee Retention Qualifications
Alright, now let's dig into this and let's speak about the employee retention credit or the ERC as some folks like to call it, prior to I enter into this, I wish to say that absolutely nothing in this video is to be taken as legal or tax guidance, this video is for general informative purposes only, yes, I am a tax and a cpa professional, but 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 assuming that if you're watching this you are a little service owner, which for employee retention credit functions suggests one hundred or less staff members for purposes of the 2020 credit and 5 hundred or fewer employees for functions of the 2021 credit, if you have a company with over five hundred employees I picture you have in-house counsel, in-house CPAs who are on top of this things, however I'm here for you small service owners who might deal with a local tax specialist who is so neck-deep in income tax return today because the government extended the tax due date to May 17 or volume is just the nature of their company that your tax specialist hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so rewarding for organization owners in 2021 and why weren't we talking about it in 2020, it's been around given that then, since the CARES Act? Yes, the employee retention credit has been around since 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.
Basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular lady with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for service 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 Qualifications
Reason, the employee retention credit for both 2020 and 2021 is now 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 employees and then turn around and claim the employee retention credit on those wages. If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to pick the best covered period that will get you complete PPP forgiveness however also optimize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll bucket with as lots of expenses as possible that do not count for employee retention credit purposes. You can't declare the employee retention credit on state joblessness insurance contributions, but state unemployment insurance coverage contributions count towards PPP forgiveness, see? So you 'd want to discard all your state unemployment insurance contributions on your PPP forgiveness application to leave as much normal salaries as possible to take the employee retention credit on.
This can get very technical very quickly and it's very scenario particular in terms of enhancing 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, however simply understand that you actually have to do the mathematics 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 incomes you claimed the employee retention credit on, which makes good sense also, why should the government offer you a deduction for these earnings that they currently gave you a credit for? So basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just love speaking about this stuff, but let's discuss another reason that the employee retention credit is more attractive now than it was in 2015, and that is that it's simpler to receive the employee retention credit in 2021. In 2020, for a quarter to receive the employee retention credit, you had to show a 50% reduction in gross receipts compared to the exact same calendar quarter in 2019.
However in 2021, for a quarter to qualify for the employee retention credit, you just require to show a 20% reduction in gross invoices compared to the exact same calendar quarter in 2019. So this indicates far more companies will certify. My organization, for example, experienced a 26% decrease 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 first, due to the fact that I got very first round of PPP money and 2nd because my service didn't suffer that large 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my service certifies. For 2021, for any quarter, you can elect to use the lookback quarter, meaning 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 on Q1 2021's gross receipts, you will likewise receive Q2 2021 given that you qualified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so essentially if you simply certify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Also, even if you didn't have a sufficient decrease in profits, you can receive the employee retention credit if you were required to fully or partially suspend operations in your service throughout any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are eligible for the employee retention credit during that period of partial or complete shutdown.
Typical example, you own a dining establishment, and your governor signed an executive order mentioning that you need to close down indoor dining. That is an example of a partial shutdown. Also, not only are more businesses eligible for the employee retention credit thanks to these brand-new laws, making PPP receivers eligible for the employee retention credit though not on the very same earnings and making more companies eligible through the 20% decline threshold rather than the 50% decline threshold, but the 2021 credit is likewise more profitable 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 certified wages per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that whole time period? For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in earnings per staff member per quarter, so we're talking about an optimum credit of $7,000 per worker per quarter. That's right, folks, the maximum 2021 employee retention credit is $28,000 per employee.
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 duration 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 stuff, 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 easier to qualify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, because I got first round of PPP cash and second because my company didn't suffer that large 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my service qualifies. Not only are more services qualified for the employee retention credit thanks to these brand-new laws, making PPP recipients qualified for the employee retention credit though not on the very same earnings and making more services eligible through the 20% decline limit rather than the 50% decrease threshold, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified salaries per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that entire time duration?
Exactly How to Start
That will certainly negotiate on behalf of their clients to obtain the ideal rates feasible for their existing customers. They will certainly investigate old invoices for errors obtaining their clients reimbursements and credits.
Assistance offered can include:
Devoted experts that will certainly translate very complicated program rules and also will certainly be readily available to answer your inquiries, including:
Exactly how does the PPP loan factor into the ERC?
What are the distinctions in between the 2020 and 2021 programs and how does it put on your business?
What are gathering regulations for larger, multi-state companies, and how do I translate numerous states executive orders?
How do part-time, Union, and tipped staff members influence the amount of my reimbursements?
Complete assessment regarding your qualification
Extensive analysis of your claim
Advice on the declaring procedure and also documentation
Specific program knowledge that a routine certified public accountant or payroll processor might not be well-versed in
Quick as well as smooth end-to-end process, from eligibility to asserting and also obtaining refunds
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
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Ready To Get Begun? Its Simple.
1. Whichever company you pick to work with will identify whether your organization qualifies and gets approvel for the ERC.
2. They will certainly assess your request as well as calculate the optimum amount you can get.
3. Their group guides you through the asserting process, from beginning to end, including correct documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and also right on September 30, 2021, for qualified companies.
You can make an application for reimbursements for 2020 and 2021 after December 31st of this year, right into 2022 and 2023. And potentially beyond then also.
Many services have received refunds, as well as others, in addition to refunds, also qualified to proceed obtaining ERC in every pay-roll they refine through December 31, 2021, at about 30% of their payroll cost.
Some businesses have actually 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 get approved for the ERC even if they already obtained a PPP finance. Note, though, that the ERC will just use to earnings not used for the PPP.
Do we still certify if we did not sustain a 20% decrease in gross billings .
A federal government authority required complete or partial closure of your service during 2020 or 2021. This includes your procedures being limited by commerce, inability to travel or limitations of group meetings.
- Gross receipt decrease standards is various for 2020 and 2021, but is gauged versus the current quarter as compared to 2019 pre-COVID amounts:
- A federal government authority required complete or partial shutdown of your organization throughout 2020 or 2021. This includes your procedures being restricted by commerce, failure to travel or constraints of group meetings.
- Gross receipt decrease requirements is various for 2020 as well as 2021, however is gauged against the existing quarter as compared to 2019 pre-COVID amounts.
Do we still qualify if we stayed open throughout the pandemic?
Yes. To qualify, your business needs to fulfill either among the following standards:
- Experienced a decrease in gross invoices by 20%, or
- Had to transform service operations as a result of federal government orders
Many items are thought about as modifications in company operations, including changes in task roles and also the acquisition of extra protective devices.