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.
Just how It Functions
Even if you don't own a business, be sure to share this video with organization owners you understand, this video could actually be worth 10s of thousands of dollars for them. And if you are an organization 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 company and your ballpark year-over-year profits, 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 reducing your needed employment 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 complexities of that kind here or the Form 941 and all the payroll stuff since that's the stuff your CPA need to stress over. In this video I wish 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 informed and take ownership of your own tax circumstances, of your organization's tax situation to produce more cash circulation in your organization and more wealth for yourself.
About Employee Retention Program
Alright, now let's go into this and let's talk about the employee retention credit or the ERC as some folks like to call it, before I enter this, I wish to state that nothing in this video is to be taken as legal or tax advice, this video is for general informative functions only, yes, I am a CPA and a tax expert, but I am not your CPA nor your tax expert unless you have actually engaged my firm as such. Another disclaimer here, for functions of this video I am presuming that if you're watching this you are a little organization owner, which for employee retention credit purposes means one hundred or fewer workers for functions of the 2020 credit and five hundred or less staff members for purposes of the 2021 credit, if you have a company with over five hundred employees I imagine you have in-house counsel, in-house CPAs who are on top of this things, but I'm here for you small company owners who might deal with a regional tax professional who is so neck-deep in income tax return right now because the government extended the tax deadline to May 17 or volume is simply the nature of their organization that your tax expert hasn't had the time to go into the weeds here like I have.
So employee retention credit, why is it so profitable for company owner in 2021 and why weren't we speaking about it in 2020, it's been around given that then, since 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 given 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 because of the PPP, the Paycheck Protection Program. Initially, in 2020, if you got a PPP loan as an employer, you were not qualified for the employee retention credit.
Basically the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular woman with thick glasses and neglected 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 appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Program
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 employees and then turn around and claim the employee retention credit on those wages. If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to pick the finest covered duration that will get you full PPP forgiveness but likewise maximize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll container with as numerous costs as possible that don't count for employee retention credit purposes. For instance, you can't declare the employee retention credit on state unemployment insurance contributions, however state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd want to dump all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much regular salaries as possible to take the employee retention credit on.
Another thing to note is you can't deduct the wages you declared the employee retention credit on, and that makes sense as well, why should the government provide you a deduction for these incomes that they currently provided you a credit for? Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, but let's talk about another factor why the employee retention credit is more appealing now than it was last year, and that is that it's easier to qualify for the employee retention credit in 2021.
But in 2021, for a quarter to qualify for the employee retention credit, you just need to reveal a 20% decrease in gross receipts compared to the exact same calendar quarter in 2019. So this suggests much more organizations will certify. My business, for example, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
I didn't certify for the 2020 employee retention credit initially, because I got very first round of PPP cash and 2nd since my service didn't suffer that large 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. For 2021, for any quarter, you can choose to utilize the lookback quarter, indicating 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. Ramification here is that if you certify for Q1 2021 based on Q1 2021's gross invoices, you will also receive Q2 2021 because you certified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just receive Q1 and Q3 2021, you likewise qualify for Q2 and Q4 based on the lookback. Also, even if you didn't have an adequate decrease in profits, you can certify for the employee retention credit if you were needed to totally or partially suspend operations in your business throughout any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are eligible 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 mentioning that you require to close down indoor dining. That is an example of a partial shutdown. Also, not only are more organizations qualified for the employee retention credit thanks to these brand-new laws, making PPP recipients eligible for the employee retention credit though not on the very same salaries and making more organizations eligible through the 20% decrease threshold instead of the 50% decrease limit, but the 2021 credit is also more profitable than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of qualified earnings per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per employee ... for that whole time duration? 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 staff member per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per employee.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to pick the best covered period that will get you full PPP forgiveness but likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this things, however let's talk about another factor why the employee retention credit is more appealing now than it was last year, and that is that it's simpler to qualify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, due to the fact that I got very first round of PPP money and 2nd because my business didn't suffer that big 50% decrease required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization qualifies. Not only are more companies qualified for the employee retention credit thanks to these brand-new laws, making PPP recipients qualified for the employee retention credit though not on the same incomes and making more companies eligible through the 20% decrease threshold rather than the 50% decrease threshold, however the 2021 credit is likewise more profitable 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 incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per staff member ... for that entire time period?
Exactly How to Get going
The best way is to collaborate with a no-risk, contingency-based expense savings company. That will work out in support of their customers to obtain the most effective prices feasible for their existing customers. They will certainly examine old invoices for mistakes obtaining for their clients refunds and also tax credits. They can boost the profitability and also total appraisal of their clients organizations.
Solutions offered can include:
Devoted experts that will certainly analyze very complex program regulations and also will be offered to address your questions, including:
Exactly how does the PPP loan aspect right into the ERC?
What are the differences in between the 2020 and 2021 programs and also just how does it relate to your company?
What are aggregation rules for larger, multi-state companies, and also just how do I interpret several states executive orders?
Just how do part-time, Union, and also tipped staff members affect the amount of my reimbursements?
Detailed evaluation regarding your qualification
Thorough evaluation of your case
Advice on the asserting procedure as well as paperwork
Specific program know-how that a routine certified public accountant or payroll processor could not be well-versed in
Smooth as well as fast end-to-end procedure, from qualification to declaring and getting reimbursements
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Ready To Get Going? Its Simple.
1. Whichever business you select to work with will identify whether your organization certifies for the ERC.
2. They will certainly evaluate your case and compute the maximum quantity you can get.
3. Their group overviews you through the asserting procedure, from beginning to end, consisting of appropriate documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and also finishes on September 30, 2021, for qualified employers.
You can get refunds for 2020 and 2021 after December 31st of this year, into 2022 as well as 2023. As well as possibly past after that as well.
Many businesses have received refunds, as well as others, in addition to reimbursements, likewise certified to continue getting ERC in every pay-roll they refine through December 31, 2021, at about 30% of their pay-roll cost.
Some services have obtained reimbursements from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can now get approved for the ERC even if they already obtained a PPP loan. Keep in mind, though, that the ERC will only relate to wages not utilized for the PPP.
Do we still certify if we did not incur a 20% decrease in gross invoices .
A federal government authority called for complete or partial shutdown of your service during 2020 or 2021. This includes your procedures being restricted by commerce, inability to travel or restrictions of team conferences.
- Gross receipt decrease standards is various for 2020 and also 2021, yet is gauged versus the current quarter as contrasted to 2019 pre-COVID amounts:
- A government authority required complete or partial closure of your organization throughout 2020 or 2021. This includes your procedures being limited by commerce, inability to take a trip or limitations of group conferences.
- Gross invoice decrease standards is various for 2020 as well as 2021, yet is gauged against the present quarter as contrasted to 2019 pre-COVID amounts.
Do we still certify if we stayed open throughout the pandemic?
Yes. To qualify, your company has to satisfy either one of the following criteria:
- Experienced a decrease in gross receipts by 20%, or
- Needed to alter company operations due to federal government orders
Lots of things are considered as changes in business procedures, consisting of changes in work functions and the acquisition of additional safety devices.