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 Works
Even if you don't own a service, be sure to share this video with service owners you understand, this video might actually be worth 10s of thousands of dollars for them. And if you are a business owner and after you see 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 email, [email protected], tell me a little about your service and your ballpark year-over-year profits, and let's see if we can get some more money back in your pocket because you can take this credit against your payroll taxes you pay by decreasing your needed work 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 type here or the Form 941 and all the payroll things because that's the things your CPA need to fret about. In this video I wish to tell you what you require 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?" You can be notified and take ownership of your own tax scenarios, of your organization's tax circumstance to generate more money flow in your service and more wealth for yourself.
About Employee Retention 2021 Ertc Qualifications
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, prior to I get into this, I desire to say that nothing in this video is to be taken as legal or tax recommendations, this video is for basic informational purposes just, yes, I am a CPA and a tax professional, but I am not your CPA nor your tax professional unless you have engaged my firm. Another disclaimer here, for purposes of this video I am assuming that if you're enjoying this you are a small company owner, which for employee retention credit functions implies one hundred or less staff members for functions of the 2020 credit and five hundred or fewer staff members for purposes of the 2021 credit, if you have a company with over five hundred employees I envision you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small company owners who may deal with a regional tax professional who is so neck-deep in income tax return today due to the fact that the federal 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 considering that then, considering that 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 since the CARES Act that was passed over a year ago in March 2020, but the employee retention credit didn't get much love in 2015 in 2020 because of the PPP, the Paycheck Protection Program. Initially, in 2020, if you received a PPP loan as a company, you were not qualified 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 attractive. Basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy girl with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for company owners 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 few reasons.
Why Employee Retention 2021 Ertc Qualifications
Factor, the employee retention credit for both 2020 and 2021 is now offered 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 declare the employee retention credit on those salaries. If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to select the finest covered duration that will get you full PPP forgiveness but also optimize your employee retention credit.
Also, for PPP forgiveness, you want to fill that payroll pail with as many expenses as possible that don't count for employee retention credit purposes. You can't claim the employee retention credit on state joblessness insurance contributions, however state joblessness insurance coverage contributions count towards PPP forgiveness, see? So you 'd desire to dispose all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much normal earnings as possible to take the employee retention credit on.
So this can get very technical really fast and it's really situation specific in terms of enhancing PPP vs. ERC and my firm has tools to figure this things out for you, I'm not going to go into all that here, however simply understand that you really need to do the mathematics when doing your PPP forgiveness to ensure you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't deduct the wages you declared the employee retention credit on, which makes good sense too, why should the government provide you a reduction for these salaries that they already gave you a credit for? So essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply love speaking about this things, however let's discuss another reason the employee retention credit is more appealing now than it was last year, and that is that it's simpler 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% reduction in gross receipts compared to the exact same calendar quarter in 2019.
But in 2021, for a quarter to receive the employee retention credit, you just need to reveal a 20% reduction in gross receipts compared to the very same calendar quarter in 2019. This means far more businesses will certify. My service, for instance, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.
I didn't qualify for the 2020 employee retention credit initially, since I got first round of PPP cash and 2nd because my company didn't suffer that big 50% decline needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company certifies. Also, for 2021, for any quarter, you can choose to utilize the lookback quarter, meaning that, for instance, even if your Q1 2021 gross invoices aren't a minimum of 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. Ramification here is that if you get approved for Q1 2021 based on Q1 2021's gross receipts, you will also certify for Q2 2021 since you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just receive Q1 and Q3 2021, you likewise receive Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decrease in revenue, you can certify for the employee retention credit if you were required to totally or partially 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 during that duration of full or partial shutdown.
Common example, you own a dining establishment, and your guv signed an executive order stating that you need to close down indoor dining. That is an example of a partial shutdown. Also, 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 same earnings and making more organizations eligible through the 20% decrease threshold rather than the 50% decrease limit, however the 2021 credit is also more financially rewarding than the 2020 credit.
This is because for 2020, the employee retention credit amounted to 50% of all qualified salaries for 2020, the employee retention credit amounted to 50% of all qualified salaries you paid workers between March 12, 2020, and December 31, 2020, with a limit of $10,000 in incomes for that whole period. The optimum 2020 credit per worker was $5,000. Not bad, however that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of qualified incomes per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per staff member ... for that entire period? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in incomes per staff member per quarter, so we're discussing an optimum credit of $7,000 per employee per quarter. If you're qualified all four quarters, $7,000 times four is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per employee. That's big. That's a godsend to many entrepreneur right now. You see what I mean now, right, how the employee retention credit has gone from unsightly duckling in 2020 to lovely swan in 2021? And by the method, by the method, qualified incomes 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 choose the best covered duration that will get you full PPP forgiveness but 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 reason why the employee retention credit is more attractive now than it was last year, and that is that it's much 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 because 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 company qualifies. Not just are more services qualified for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the same wages and making more companies eligible through the 20% decline limit rather than the 50% decline limit, 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 qualified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that whole time duration?
Just How to Begin
That will bargain on part of their clients to obtain the ideal costs possible for their existing customers. They will certainly investigate old billings for mistakes obtaining their clients reimbursements as well as credits.
Services offered can include:
Committed experts that will certainly translate very complex program guidelines and also will certainly be available to address your questions, including:
Just how does the PPP lending element right into the ERC?
What are the differences in between the 2020 and also 2021 programs as well as how does it relate to your service?
What are gathering guidelines for larger, multi-state companies, and exactly how do I analyze numerous states executive orders?
Exactly how do part-time, Union, as well as tipped workers impact the amount of my refunds?
Complete analysis regarding your eligibility
Extensive analysis of your case
Support on the declaring procedure as well as paperwork
Certain program experience that a routine certified public accountant or pay-roll processor may not be well-versed in
Rapid and smooth end-to-end procedure, from eligibility to claiming and also getting refunds
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
All Set To Start? Its Simple.
1. Whichever company you choose to work with will certainly figure out whether your organization qualifies for the ERC.
2. They will examine your claim and calculate the maximum amount you can receive.
3. Their team overviews you through the claiming procedure, from starting to finish, including appropriate documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 and also ends on September 30, 2021, for qualified businesses.
You can get reimbursements for 2020 and also 2021 after December 31st of this year, into 2022 and 2023. As well as possibly past after that too.
Many organizations have received refunds, as well as others, along with reimbursements, also certified to continue getting ERC in every payroll they refine to December 31, 2021, at about 30% of their pay-roll cost.
Some organizations have actually obtained reimbursements from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can currently get the ERC even if they currently received a PPP car loan. Keep in mind, however, that the ERC will only relate to earnings not used for the PPP.
sustain a 20% decline in gross invoices .
A government authority called for partial or complete shutdown of your company during 2020 or 2021. This includes your procedures being limited by business, inability to take a trip or restrictions of group conferences.
- Gross invoice decrease requirements is various for 2020 as well as 2021, however is gauged against the current quarter as contrasted to 2019 pre-COVID quantities:
- A government authority needed complete or partial shutdown of your business throughout 2020 or 2021. This includes your operations being restricted by business, failure to travel or constraints of team meetings.
- Gross receipt reduction standards is various for 2020 as well as 2021, but is measured against the current quarter as compared to 2019 pre-COVID quantities.
Do we still certify if we stayed open throughout the pandemic?
Yes. To qualify, your company must satisfy either among the following standards:
- Experienced a decline in gross receipts by 20%, or
- Needed to alter business procedures because of government orders
Many products are thought about as modifications in business operations, consisting of changes in job roles and also the purchase of additional protective equipment.