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?