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 business owners don't understand about this, or they've found out about it, but they don't understand much about it, even many tax experts don't understand the ins and outs of this thing because it's new and a great deal of these changesthat are beneficial to company owner 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 profitable now in 2021, more profitable, far more rewarding, in fact now than it was in 2020, 5x more lucrative at least. So even if you do not own a business, be sure to share this video with entrepreneur you understand, this video could literally deserve 10s of thousands of dollars for them. And if you are an entrepreneur and after you view this video you wish to talk with me and a member of my team, who will likewise be either a CPA like myself or an EA, shoot me an e-mail, [email protected], tell me a little about your company and your ballpark year-over-year income, and let's see if we can get some more cash back in your pocket since you can take this credit versus your payroll taxes you pay by minimizing 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 complexities of that form here or the Form 941 and all the payroll stuff because that's the stuff your CPA should stress over. In this video I desire to inform you what you need to know so you can go to your CPA and say, "Hey, what about this employee retention credit, why haven't you told me about this?" so you can be notified and take ownership of your own tax scenarios, of your company's tax circumstance to produce more capital in your business and more wealth for yourself.
About Employee Retention Tax Credit 2020
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 desire to say that nothing in this video is to be taken as legal or tax advice, this video is for basic informational functions only, yes, I am a tax and a certified public accountant professional, however I am not your CPA nor your tax professional unless you have actually engaged my firm. Another disclaimer here, for purposes of this video I am assuming that if you're enjoying this you are a small service owner, which for employee retention credit purposes means one hundred or fewer workers for functions of the 2020 credit and five hundred or less workers for purposes of the 2021 credit, if you have a business with over 5 hundred workers I envision you have in-house counsel, in-house CPAs who are on top of this things, but I'm here for you little organization owners who may work with a local tax expert who is so neck-deep in tax returns today since the federal government extended the tax due date to May 17 or volume is simply the nature of their company that your tax specialist hasn't had the time to dig into the weeds here like I have.
So 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 since then, since the CARES Act? Why is it getting all this buzz now that it wasn't in 2015? 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, but 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 received a PPP loan as a company, you were not eligible for the employee retention credit.
However 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 far more appealing. So generally the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular woman with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for company owner in 2021. Why? Why is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a couple of reasons.
Why Employee Retention Tax Credit 2020
Reason, the employee retention credit for both 2020 and 2021 is now available to PPP recipients, however 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 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 finest covered period that will get you complete PPP forgiveness however likewise optimize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll pail with as lots of costs as possible that don't count for employee retention credit functions. For instance, you can't claim the employee retention credit on state unemployment insurance contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? You 'd desire to dispose all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much normal salaries as possible to take the employee retention credit on.
Another thing to note is you can't subtract the wages you claimed the employee retention credit on, and that makes sense as well, why should the government give you a reduction for these incomes that they currently gave you a credit for? 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 attractive now than it was last year, and that is that it's much easier to certify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you just require to reveal a 20% decline in gross receipts compared to the same calendar quarter in 2019. This indicates far more businesses will qualify. My service, for instance, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
I didn't qualify for the 2020 employee retention credit initially, because I got first round of PPP cash and second due to the fact that my service 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 company 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 functions 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 certify for Q1 2021 based on Q1 2021's gross receipts, you will likewise receive Q2 2021 given that you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so generally if you just get approved for Q1 and Q3 2021, you also receive Q2 and Q4 based upon the lookback. Even if you didn't have a sufficient decline in profits, you can qualify for the employee retention credit if you were needed to fully or partly suspend operations in your business 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.
Common example, you own a restaurant, and your guv signed an executive order mentioning that you require to close down indoor dining. That is an example of a partial shutdown. Also, not just 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 very same earnings and making more companies eligible through the 20% decrease limit instead of the 50% decline threshold, however the 2021 credit is also more profitable 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 qualified incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that entire 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 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 maximum 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 select the finest covered period that will get you full PPP forgiveness however also maximize your employee retention credit.
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 easier to qualify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, since I got first round of PPP cash and second due to the fact that my company didn't suffer that big 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Not only are more businesses 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 exact same wages and making more services eligible through the 20% decrease threshold rather than the 50% decrease threshold, however the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of qualified incomes per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that whole time period?
Just How to Start
The very best means is to collaborate with a no-risk, contingency-based price savings business. That will work out on part of their customers to get the ideal costs possible for their existing customers. They will investigate old invoices for errors getting their clients refunds and credits. They can increase the earnings and also overall appraisal of their customers companies.
Solutions provided can include:
Committed experts that will certainly translate extremely intricate program policies and will be available to address your questions, including:
Just how does the PPP finance element right into the ERC?
What are the distinctions between the 2020 as well as 2021 programs and how does it use to your company?
What are gathering policies for bigger, multi-state employers, as well as exactly how do I interpret multiple states executive orders?
Exactly how do part-time, Union, as well as tipped workers affect the amount of my refunds?
Detailed assessment concerning your eligibility
Thorough analysis of your situation
Support on the claiming process and documentation
Particular program competence that a normal CPA or payroll processor may not be well-versed in
Smooth as well as fast end-to-end process, from qualification to asserting and also obtaining refunds
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|Finance Pro Plus
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Prepared To Get Started? Its Simple.
1. Whichever business you select to work with will establish whether your business qualifies for the ERC.
2. They will examine your claim and calculate the maximum quantity you can receive.
3. Their group guides you through the declaring process, from starting to end, consisting of correct paperwork.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 and also ends on September 30, 2021, for qualified companies.
You can apply for refunds for 2020 and 2021 after December 31st of this year, right into 2022 and 2023. And also possibly beyond then as well.
Many services have received reimbursements, and others, in enhancement to refunds, additionally certified to continue getting ERC in every payroll they process to December 31, 2021, at around 30% of their payroll expense.
Some services have gotten refunds from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can currently get the ERC also if they currently received a PPP finance. Note, however, that the ERC will only put on incomes not utilized for the PPP.
maintain a 20% reduction in gross receipts .
A government authority required partial or full shutdown of your company during 2020 or 2021. This includes your procedures being limited by commerce, lack of ability to travel or limitations of team conferences.
- Gross invoice reduction standards is various for 2020 and also 2021, however is determined versus the present quarter as compared to 2019 pre-COVID quantities:
- A federal government authority needed full or partial shutdown of your business during 2020 or 2021. This includes your procedures being restricted by commerce, failure to take a trip or constraints of group meetings.
- Gross invoice reduction criteria is various for 2020 and 2021, however is determined against the current quarter as contrasted to 2019 pre-COVID amounts.
Do we still certify if we continued to be open throughout the pandemic?
Yes. To certify, your business has to fulfill either among the complying with standards:
- Experienced a decrease in gross receipts by 20%, or
- Had to alter service procedures because of federal government orders
Several items are taken into consideration as adjustments in organization procedures, consisting of changes in task duties and the purchase of added protective tools.