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 Works
This is huge, a great deal of small company owners don't understand about this, or they've heard about it, however they don't know much about it, even many tax experts do not know the ins and outs of this thing since it's new and a lot of these modificationsthat are advantageous to company owner occurred 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, even more financially rewarding, in reality now than it remained in 2020, 5x more financially rewarding a minimum of. Even if you don't own a company, be sure to share this video with organization owners you understand, this video could literally be worth tens of thousands of dollars for them. And if you are a company owner and after you enjoy 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 email, [email protected], tell me a little about your business and your ballpark year-over-year earnings, and let's see if we can get some more cash back in your pocket due to the fact that you can take this credit against your payroll taxes you pay by decreasing 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 intricacies of that form here or the Form 941 and all the payroll things because that's the stuff your CPA should stress about. In this video I wish to tell you what you need to understand so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you informed me about this?" You can be informed and take ownership of your own tax scenarios, of your business's tax circumstance to produce more money flow in your company and more wealth for yourself.
About Employee Retention Ertc Credit
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 want to say that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for basic informational functions only, yes, I am a tax and a cpa professional, but I am not your CPA nor your tax expert unless you have actually engaged my company. Another disclaimer here, for functions of this video I am presuming that if you're viewing this you are a little business owner, which for employee retention credit purposes implies one hundred or fewer workers for functions of the 2020 credit and five hundred or fewer staff members for purposes of the 2021 credit, if you have a business with over 5 hundred staff members I envision you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you small business owners who may work with a local tax specialist who is so neck-deep in tax returns right now since the federal government extended the tax due date to May 17 or volume is simply the nature of their service that your tax specialist hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so financially rewarding for company owners in 2021 and why weren't we talking about it in 2020, it's been around because then, given that the CARES Act? Yes, the employee retention credit has been around since 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.
Essentially 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 service 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 Credit
Reason, the employee retention credit for both 2020 and 2021 is now readily available to PPP receivers, 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 earnings. If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to select the best covered duration that will get you complete PPP forgiveness however also maximize your employee retention credit.
Likewise, for PPP forgiveness, you wish to fill up that payroll bucket with as lots of expenses as possible that do not count for employee retention credit functions. You can't claim the employee retention credit on state joblessness insurance contributions, however state joblessness insurance contributions count toward PPP forgiveness, see? You 'd desire to discard all your state joblessness insurance contributions on your PPP forgiveness application to leave as much ordinary earnings as possible to take the employee retention credit on.
This can get really technical very fast and it's really scenario specific in terms of optimizing PPP vs. ERC and my firm has tools to figure this stuff out for you, I'm not going to dig into all that here, but just know that you actually have to do the mathematics 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 wages you claimed the employee retention credit on, which makes good sense too, why should the government give you a deduction for these earnings that they currently offered you a credit for? So essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply like speaking about this things, however let's discuss another reason that the employee retention credit is more attractive now than it was in 2015, and that is that it's simpler to certify for the employee retention credit in 2021. In 2020, for a quarter to certify for the employee retention credit, you had to reveal a 50% decline in gross invoices compared to the same calendar quarter in 2019.
However in 2021, for a quarter to receive the employee retention credit, you just require to show a 20% reduction in gross invoices compared to the same calendar quarter in 2019. This implies far more businesses will certify. My business, for instance, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
I didn't qualify for the 2020 employee retention credit initially, because I got very first round of PPP cash and second because my business 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 business qualifies. Also, for 2021, for any quarter, you can choose to use the lookback quarter, suggesting that, for example, even if your Q1 2021 gross invoices aren't a minimum of 20% lower than your Q1 2019 gross invoices, you can compare for purposes of determining eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you get approved for Q1 2021 based on Q1 2021's gross receipts, you will likewise get approved for Q2 2021 given that you qualified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just qualify for Q1 and Q3 2021, you likewise qualify for Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decrease in earnings, you can qualify for the employee retention credit if you were needed to completely 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 restaurant, and your governor signed an executive order stating that you require to shut down indoor dining. That is an example of a partial shutdown. Not only are more services 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 exact same incomes and making more companies eligible through the 20% decrease threshold rather than the 50% decrease threshold, but the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of certified salaries per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per staff member ... for that whole time duration? 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 employee per quarter, so we're talking about a maximum credit of $7,000 per staff member per quarter. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker.
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 however likewise maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply enjoy talking about this stuff, but let's talk about another reason why the employee retention credit is more appealing now than it was last year, and that is that it's easier to certify for the employee retention credit in 2021. 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 since my service didn't suffer that large 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. Not only are more businesses 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 exact same wages and making more organizations eligible through the 20% decrease limit rather than the 50% decline threshold, however the 2021 credit is also more financially rewarding than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified wages per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that whole time duration?
Exactly How to Begin
That will certainly bargain on part of their customers to obtain the best prices feasible for their existing clients. They will certainly investigate old billings for mistakes getting their customers refunds and also tax credits.
Services offered can include:
Committed specialists that will interpret extremely complex program policies as well as will certainly be offered to answer your questions, including:
How does the PPP finance factor right into the ERC?
What are the differences in between the 2020 and also 2021 programs as well as just how does it use to your business?
What are gathering policies for larger, multi-state employers, and also exactly how do I interpret multiple states executive orders?
Exactly how do part-time, Union, and tipped employees influence the amount of my refunds?
Extensive assessment regarding your eligibility
Detailed evaluation of your claim
Assistance on the asserting process and documentation
Specific program proficiency that a routine CPA or payroll cpu could not be well-versed in
Fast and also smooth end-to-end procedure, from eligibility to claiming and also getting 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 figure out whether your business qualifies for the ERC.
2. They will certainly evaluate your request and calculate the optimum quantity you can obtain.
3. Their group overviews you via the asserting process, from beginning to end, including correct documentation.
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 eligible businesses.
You can get reimbursements for 2020 and also 2021 after December 31st of this year, right into 2022 and also 2023. And possibly beyond after that as well.
Many organizations have received reimbursements, as well as others, in enhancement to refunds, also certified to proceed getting ERC in every pay-roll they refine through December 31, 2021, at close to 30% of their payroll cost.
Some companies have received reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can currently get approved for the ERC even if they currently got a PPP funding. Note, though, that the ERC will only relate to salaries not utilized for the PPP.
Do we still accredit if we did not sustain a 20% decrease in gross invoices .
A federal government authority needed partial or complete shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to take a trip or limitations of team meetings.
- Gross invoice decrease criteria is various for 2020 and also 2021, but is determined against the current quarter as compared to 2019 pre-COVID quantities:
- A government authority called for partial or complete shutdown of your business during 2020 or 2021. This includes your procedures being limited by business, failure to take a trip or limitations of team conferences.
- Gross receipt reduction standards is different for 2020 and 2021, yet is measured against the existing quarter as contrasted to 2019 pre-COVID amounts.
Do we still qualify if we continued to be open during the pandemic?
Yes. To certify, your organization should fulfill either one of the adhering to standards:
- Experienced a decrease in gross receipts by 20%, or
- Had to change company operations as a result of government orders
Lots of items are thought about as changes in service operations, consisting of changes in job functions as well as the purchase of extra protective devices.