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 Functions
Even if you do not own a company, be sure to share this video with company owners you know, this video could literally be worth 10s of thousands of dollars for them. And if you are a service owner and after you see this video you want 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 service and your ballpark year-over-year earnings, and let's see if we can get some more cash back in your pocket because you can take this credit versus your payroll taxes you pay by reducing 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.
I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll stuff because that's the stuff your CPA must stress over. In this video I wish to tell you what you require to understand 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 company's tax scenario to generate more money flow in your organization and more wealth for yourself.
About Employee Retention Ertc
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, before I enter into this, I wish to say that absolutely nothing in this video is to be taken as legal or tax advice, this video is for basic educational functions just, yes, I am a tax and a certified public accountant professional, however I am not your CPA nor your tax expert unless you have engaged my company as such. Another disclaimer here, for functions of this video I am assuming that if you're seeing this you are a small company owner, which for employee retention credit purposes implies one hundred or less staff members for purposes of the 2020 credit and 5 hundred or less employees for functions of the 2021 credit, if you have a company with over 5 hundred workers I picture you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you small organization owners who may deal with a local tax expert who is so neck-deep in income tax return today because the government extended the tax deadline to May 17 or volume is simply the nature of their business that your tax professional hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so lucrative for organization owners in 2021 and why weren't we talking about it in 2020, it's been around since then, given that the CARES Act? Yes, the employee retention credit has been around considering that 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 between 2020 and 2021, it went from the nerdy lady with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for business 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 Ertc
Factor, 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 declare the employee retention credit on those wages. The government does not look too fondly on paying your payroll for you through the PPP and then you declaring a credit against the taxes you pay the federal government on those salaries that the government spent for you. So that makes sense. Now, there's some planning here. 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 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 numerous costs as possible that don't count for employee retention credit purposes. For instance, you can't claim the employee retention credit on state joblessness insurance coverage contributions, but state unemployment insurance coverage contributions count towards PPP forgiveness, see? You 'd desire to dump all your state unemployment insurance contributions on your PPP forgiveness application to leave as much normal incomes as possible to take the employee retention credit on.
This can get very technical very quick and it's very scenario particular in terms of enhancing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to dig into all that here, however just understand that you truly have to do the math 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 deduct the earnings you declared the employee retention credit on, and that makes good sense too, why should the federal government offer you a deduction for these salaries that they already provided you a credit for? So basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just enjoy discussing this things, but let's speak about another reason that the employee retention credit is more appealing now than it was last year, which is that it's simpler to receive the employee retention credit in 2021. In 2020, for a quarter to certify for the employee retention credit, you had to show a 50% decrease in gross receipts compared to the exact same calendar quarter in 2019.
However in 2021, for a quarter to certify for the employee retention credit, you only need to show a 20% decline in gross receipts compared to the exact same calendar quarter in 2019. So this implies much more organizations will certify. My organization, for example, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.
I didn't certify for the 2020 employee retention credit first, due to the fact that I got first round of PPP cash and 2nd because my service didn't suffer that large 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Likewise, for 2021, for any quarter, you can elect to utilize the lookback quarter, indicating that, for example, even if your Q1 2021 gross receipts 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 qualify for Q1 2021 based upon Q1 2021's gross invoices, you will likewise certify for Q2 2021 since you qualified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply certify for Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based upon the lookback. Likewise, even if you didn't have an enough decline in earnings, you can receive the employee retention credit if you were required to fully or partly suspend operations in your business during any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are qualified for the employee retention credit throughout that period of complete or partial shutdown.
Typical example, you own a dining establishment, and your governor signed an executive order stating that you require to close down indoor dining. That is an example of a partial shutdown. Likewise, not only are more services qualified for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the very same salaries and making more services eligible through the 20% decline limit instead of the 50% decline limit, however the 2021 credit is likewise more profitable than the 2020 credit.
This is because for 2020, the employee retention credit was equivalent to 50% of all qualified wages for 2020, the employee retention credit amounted to 50% of all qualified earnings you paid employees between March 12, 2020, and December 31, 2020, with a limit of $10,000 in wages for that whole time duration. So the optimum 2020 credit per staff member was $5,000. Okay, but that's nothing compared to the 2021 credit because for 2021, the credit amounts to 70% of qualified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that whole time duration? No. Per quarter. For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in wages per staff member per quarter, so we're talking about a maximum credit of $7,000 per employee per quarter. If you're qualified all 4 quarters, $7,000 times four is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's substantial. That's a godsend to lots of organization owners today. So you see what I indicate now, right, how the employee retention credit has gone from unsightly duckling in 2020 to lovely swan in 2021, right? And by the way, by the method, certified earnings includes employer-paid health insurance premiums.
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 complete PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love 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 simpler to certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, since I got very first round of PPP cash and second due to the fact that my company didn't suffer that big 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. Not just are more businesses eligible for the employee retention credit thanks to these brand-new laws, making PPP receivers qualified for the employee retention credit though not on the same wages and making more organizations eligible through the 20% decline threshold rather than the 50% decline limit, but the 2021 credit is likewise more rewarding 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 equal to 70% of certified incomes per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per employee ... for that entire time period?
Exactly How to Begin
That will certainly discuss on behalf of their clients to obtain the finest prices possible for their existing customers. They will certainly investigate old billings for errors obtaining their clients refunds and credits.
Services provided can include:
Dedicated experts that will analyze highly complicated program guidelines and will certainly be available to address your concerns, including:
How does the PPP lending element into the ERC?
What are the differences in between the 2020 and 2021 programs as well as exactly how does it put on your service?
What are aggregation regulations for bigger, multi-state employers, and exactly how do I analyze multiple states executive orders?
Exactly how do part-time, Union, and also tipped employees influence the quantity of my reimbursements?
Complete examination regarding your qualification
Thorough analysis of your situation
Advice on the declaring procedure as well as documentation
Details program proficiency that a routine CPA or pay-roll processor might not be well-versed in
Smooth as well as rapid end-to-end procedure, from qualification to claiming and getting refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Obtain Started? Its Simple.
1. Whichever company you pick to work with will identify whether your business certifies and gets approvel for the ERC.
2. They will assess your request as well as compute the optimum quantity you can get.
3. Their group guides you via the claiming process, from beginning to finish, including appropriate documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 as well as right on September 30, 2021, for qualified organizations.
You can request refunds for 2020 as well as 2021 after December 31st of this year, into 2022 and 2023. As well as possibly beyond after that too.
Many services have received reimbursements, and others, in enhancement to refunds, also qualified to proceed obtaining ERC in every pay-roll they refine through December 31, 2021, at close to 30% of their payroll cost.
Some organizations have obtained refunds from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can now certify for the ERC also if they already received a PPP finance. Note, though, that the ERC will only relate to salaries not made use of for the PPP.
sustain a 20% decline in gross invoices .
A government authority called for partial or full shutdown of your company throughout 2020 or 2021. This includes your operations being limited by business, failure to take a trip or constraints of group meetings.
- Gross receipt decrease standards is different for 2020 and also 2021, yet is gauged versus the current quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority called for full or partial closure of your organization throughout 2020 or 2021. This includes your procedures being restricted by business, lack of ability to take a trip or limitations of team meetings.
- Gross receipt decrease criteria is different for 2020 as well as 2021, however is measured against the current quarter as contrasted to 2019 pre-COVID amounts.
Do we still certify if we remained open throughout the pandemic?
Yes. To certify, your business must satisfy either among the complying with requirements:
- Experienced a decline in gross invoices by 20%, or
- Needed to change organization operations because of government orders
Several things are taken into consideration as adjustments in service procedures, including shifts in job functions and also the acquisition of extra safety tools.