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.
Exactly How It Functions
This is huge, a lot of little company owners do not learn about this, or they've heard about it, but they do not understand much about it, even lots of tax specialists do not understand the ins and outs of this thing due to the fact that it's new and a great deal of these changesthat are beneficial to entrepreneur took place in the middle of tax season. So in this video I'm going to dig into the employee retention credit, why it's so profitable now in 2021, more rewarding, far more rewarding, in reality now than it remained in 2020, 5x more rewarding at least. Even if you do not own a company, be sure to share this video with service owners you know, this video could actually be worth 10s of thousands of dollars for them. And if you are a service owner and after you see this video you wish to talk with me and a member of my group, 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 organization and your ballpark year-over-year revenue, 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 decreasing your required 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 things your CPA should stress about, I am not going to get into the complexities of that form here or the Form 941 and all the payroll things. In this video I want to inform you what you require to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why haven't you informed me about this?" You can be notified and take ownership of your own tax circumstances, of your service's tax scenario to generate more money circulation in your organization and more wealth for yourself.
About Employee Retention Credit 2021
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 state that nothing in this video is to be taken as legal or tax recommendations, this video is for general educational functions just, yes, I am a CPA and a tax expert, however 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 presuming that if you're seeing this you are a small company owner, which for employee retention credit purposes means one hundred or fewer staff members for functions of the 2020 credit and five hundred or less staff members for functions of the 2021 credit, if you have a business with over five hundred employees I imagine you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you little business owners who may deal with a local tax professional who is so neck-deep in tax returns right now since the government extended the tax deadline to May 17 or volume is just the nature of their company 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 lucrative for business owners in 2021 and why weren't we talking about it in 2020, it's been around because then, because the CARES Act? Yes, the employee retention credit has been around because 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.
Generally the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular girl with thick glasses and unkempt eyebrows and her hair up in 2020 to the belle of the ball for organization owners in 2021. Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Credit 2021
Factor, the employee retention credit for both 2020 and 2021 is now available to PPP receivers, 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 incomes. 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 period that will get you complete PPP forgiveness but likewise maximize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as numerous 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, however state joblessness insurance contributions count towards PPP forgiveness, see? You 'd desire to discard all your state unemployment insurance contributions on your PPP forgiveness application to leave as much common earnings as possible to take the employee retention credit on.
Another thing to note is you can't deduct the incomes you claimed the employee retention credit on, and that makes sense as well, why should the government offer you a reduction for these earnings that they already gave you a credit for? Alright, sorry for getting a little sidetracked there, I just like talking about this things, however 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 simpler to qualify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you only need to show a 20% reduction in gross receipts compared to the exact same calendar quarter in 2019. So this implies far more businesses will certify. My service, for instance, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
So I didn't receive the 2020 employee retention credit initially, because I got first round of PPP money and 2nd due to the fact that my business didn't suffer that big 50% decrease required to get approved for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. For 2021, for any quarter, you can elect to use the lookback quarter, implying that, for example, even if your Q1 2021 gross receipts aren't at least 20% lower than your Q1 2019 gross receipts, you can compare for functions of identifying eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you receive Q1 2021 based upon Q1 2021's gross receipts, you will likewise certify for Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just get approved for Q1 and Q3 2021, you likewise receive Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decline in income, you can certify for the employee retention credit if you were needed to totally or partially suspend operations in your organization 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 period of partial or complete shutdown.
Typical example, you own a restaurant, and your guv signed an executive order stating that you require to close down indoor dining. That is an example of a partial shutdown. Not only are more companies eligible for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the same earnings and making more services eligible through the 20% decrease threshold rather than the 50% decline limit, but the 2021 credit is likewise more lucrative than the 2020 credit.
This is because for 2020, the employee retention credit was equal to 50% of all certified salaries for 2020, the employee retention credit amounted to 50% of all qualified earnings you paid workers in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in salaries for that entire time duration. So the optimum 2020 credit per worker was $5,000. Okay, however that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of qualified earnings per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that entire time duration? No. Per quarter. For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in wages per employee per quarter, so we're talking about a maximum credit of $7,000 per employee per quarter. $7,000 times four is $28,000 if you're qualified all four quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's substantial. That's a godsend to many entrepreneur right now. You see what I imply now, right, how the employee retention credit has gone from ugly duckling in 2020 to lovely swan in 2021? And by the method, by the method, certified incomes includes employer-paid health insurance coverage 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 select 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 just enjoy talking about this things, 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 very first round of PPP cash and second due to the fact that my organization 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 service qualifies. Not just are more companies 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 wages and making more organizations eligible through the 20% decline limit rather than the 50% decrease threshold, however the 2021 credit is also more financially rewarding than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified salaries per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per staff member ... for that entire time duration?
Just How to Start
That will certainly negotiate on behalf of their customers to get the finest costs feasible for their existing customers. They will audit old billings for mistakes getting their customers refunds and credits.
Services provided can include:
Dedicated specialists that will interpret highly complex program rules as well as will be offered to address your inquiries, including:
Just how does the PPP funding element right into the ERC?
What are the differences in between the 2020 as well as 2021 programs and exactly how does it relate to your business?
What are gathering policies for larger, multi-state employers, as well as just how do I interpret numerous states executive orders?
Just how do part-time, Union, and also tipped staff members impact the quantity of my refunds?
Complete analysis regarding your qualification
Detailed evaluation of your case
Guidance on the asserting procedure and also documents
Details program knowledge that a normal CPA or pay-roll processor might not be well-versed in
Fast and smooth end-to-end procedure, from eligibility to asserting as well as obtaining refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Get Going? Its Simple.
1. Whichever firm you pick to work with will identify whether your organization qualifies and gets approvel for the ERC.
2. They will analyze your case and calculate the maximum amount you can obtain.
3. Their group overviews you through the declaring process, from beginning to finish, consisting of correct documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 and also finishes on September 30, 2021, for qualified businesses.
You can get refunds for 2020 as well as 2021 after December 31st of this year, into 2022 and also 2023. And also possibly past then as well.
Many organizations have received reimbursements, as well as others, along with refunds, also qualified to continue getting ERC in every payroll they process through December 31, 2021, at about 30% of their pay-roll cost.
Some companies have obtained reimbursements from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now certify for the ERC also if they already got a PPP car loan. Note, though, that the ERC will just relate to incomes not used for the PPP.
Do we still qualify if we did not incur a 20% decline in gross invoices .
A federal government authority called for partial or full closure of your service during 2020 or 2021. This includes your procedures being restricted by commerce, lack of ability to take a trip or constraints of group conferences.
- Gross receipt decrease requirements is various for 2020 and also 2021, however is determined versus the present quarter as compared to 2019 pre-COVID quantities:
- A government authority needed full or partial closure of your organization during 2020 or 2021. This includes your procedures being limited by commerce, inability to take a trip or limitations of group meetings.
- Gross invoice decrease standards is various for 2020 and 2021, but is measured against the existing quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we remained open throughout the pandemic?
Yes. To qualify, your business should fulfill either among the following requirements:
- Experienced a decline in gross receipts by 20%, or
- Needed to alter business procedures because of federal government orders
Numerous items are taken into consideration as modifications in service operations, including shifts in work duties and also the acquisition of additional safety tools.