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 big, a lot of small company owners do not know about this, or they've heard about it, but they do not understand much about it, even lots of tax professionals do not understand the ins and outs of this thing since it's brand-new and a great deal of these modificationsthat are advantageous to company owners occurred in the middle of tax season. So in this video I'm going to go into the employee retention credit, why it's so financially rewarding now in 2021, more financially rewarding, far more rewarding, in reality now than it remained in 2020, 5x more lucrative at least. Even if you don't own a business, be sure to share this video with business owners you understand, this video might actually be worth 10s of thousands of dollars for them. And if you are a company owner and after you enjoy this video you want 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 email, [email protected], inform 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 against your payroll taxes you pay by reducing your needed work tax deposits or you can request an advance payment of the credit using IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Since that's the things your CPA need to stress about, I am not going to get into the complexities of that form here or the Form 941 and all the payroll stuff. In this video I wish to tell you what you need to know so you can go to your CPA and say, "Hey, what about this employee retention credit, why have not you informed me about this?" so you can be informed and take ownership of your own tax scenarios, of your service's tax situation to produce more cash flow in your company and more wealth for yourself.
About Employee Retention Qualifications
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 state that nothing in this video is to be taken as legal or tax advice, this video is for basic educational purposes just, yes, I am a tax and a certified public accountant expert, but I am not your CPA nor your tax expert unless you have actually engaged my company. Another disclaimer here, for purposes of this video I am presuming that if you're watching this you are a little business owner, which for employee retention credit purposes means one hundred or less employees for purposes of the 2020 credit and five hundred or fewer staff members for functions of the 2021 credit, if you have a company with over five hundred employees I envision 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 may deal with a regional tax expert who is so neck-deep in tax returns today due to the fact that the government extended the tax deadline to May 17 or volume is simply the nature of their service that your tax professional hasn't had the time to dig into the weeds here like I have.
So employee retention credit, why is it so rewarding for organization owners in 2021 and why weren't we discussing it in 2020, it's been around ever since, given that the CARES Act? Why is it getting all this buzz now that it wasn't last year? 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, but the employee retention credit didn't get much love in 2015 in 2020 because of the PPP, the Paycheck Protection Program. Initially, in 2020, if you received a PPP loan as a company, you were not qualified for the employee retention credit.
Essentially the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy lady with unkempt eyebrows and thick glasses 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 Qualifications
Factor, 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 claim 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 need to choose the finest covered duration that will get you complete PPP forgiveness however likewise maximize your employee retention credit.
Likewise, for PPP forgiveness, you wish to fill up that payroll bucket with as numerous expenses as possible that do not count for employee retention credit purposes. You can't declare the employee retention credit on state joblessness insurance contributions, but state joblessness insurance contributions count toward PPP forgiveness, see? You 'd desire to discard all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much ordinary earnings 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 offer you a reduction for these wages that they currently offered you a credit for? Alright, sorry for getting a little sidetracked there, I simply like talking about this stuff, however 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 much easier to certify for the employee retention credit in 2021.
In 2021, for a quarter to qualify for the employee retention credit, you only require to show a 20% decline in gross receipts compared to the very same calendar quarter in 2019. So this implies much more organizations 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 last year too.
I didn't certify for the 2020 employee retention credit initially, because I got first round of PPP cash and 2nd due to the fact that my company didn't suffer that big 50% decrease needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization qualifies. Likewise, for 2021, for any quarter, you can elect 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 receipts, you can compare for purposes 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 get approved for Q1 2021 based on Q1 2021's gross invoices, you will also certify for Q2 2021 because you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you simply receive Q1 and Q3 2021, you also certify for Q2 and Q4 based on the lookback. Even if you didn't have a sufficient decline in income, you can certify for the employee retention credit if you were needed to completely 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 qualified for the employee retention credit during that period of complete or partial shutdown.
Typical example, you own a restaurant, and your guv signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Also, not just are more companies qualified for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the same earnings and making more businesses eligible through the 20% decline threshold rather than the 50% decrease limit, but the 2021 credit is likewise more lucrative than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit amounted to 50% of all certified earnings for 2020, the employee retention credit was equivalent to 50% of all qualified wages you paid workers in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in incomes for that whole time period. The optimum 2020 credit per employee was $5,000. Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit amounts to 70% of qualified salaries per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that whole 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 earnings per worker per quarter, so we're talking about an optimum credit of $7,000 per employee per quarter. $7,000 times 4 is $28,000 if you're eligible all four quarters. That's right, folks, the optimum 2021 employee retention credit is $28,000 per staff member. That's substantial. That's a godsend to lots of entrepreneur today. You see what I mean now, right, how the employee retention credit has gone from ugly duckling in 2020 to gorgeous swan in 2021? And by the method, by the method, certified salaries 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 finest covered period that will get you complete PPP forgiveness but 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 qualify for the 2020 employee retention credit first, due to the fact that I got very first round of PPP money and 2nd due to the fact that my organization didn't suffer that large 50% decrease needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization qualifies. Not only are more businesses qualified for the employee retention credit thanks to these brand-new laws, making PPP receivers qualified for the employee retention credit though not on the exact same incomes and making more companies eligible through the 20% decline limit rather than the 50% decrease limit, but the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of certified earnings per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that entire time duration?
How to Begin
That will work out on part of their customers to obtain the best costs feasible for their existing customers. They will examine old billings for errors obtaining their customers reimbursements and also credits.
Solutions provided can include:
Dedicated professionals that will certainly translate highly complex program guidelines and will be available to address your questions, including:
How does the PPP funding aspect right into the ERC?
What are the distinctions in between the 2020 and 2021 programs and also how does it use to your service?
What are gathering policies for bigger, multi-state employers, and also exactly how do I translate multiple states executive orders?
Exactly how do part-time, Union, and tipped employees impact the quantity of my reimbursements?
Extensive evaluation regarding your eligibility
Thorough evaluation of your claim
Guidance on the declaring process and also paperwork
Particular program expertise that a normal certified public accountant or payroll cpu may not be well-versed in
Fast as well as smooth end-to-end procedure, from eligibility 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
Prepared To Get Going? Its Simple.
1. Whichever firm you select to work with will determine whether your service qualifies for the ERC.
2. They will assess your request and compute the maximum amount you can get.
3. Their team guides you through the declaring procedure, from beginning to finish, consisting of correct paperwork.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and finishes on September 30, 2021, for qualified companies.
You can obtain refunds for 2020 and 2021 after December 31st of this year, right into 2022 as well as 2023. And potentially past after that too.
Many companies have received reimbursements, and also others, in enhancement to refunds, likewise certified to proceed obtaining ERC in every pay-roll they process to December 31, 2021, at around 30% of their payroll expense.
Some companies have actually obtained reimbursements from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can currently get approved for the ERC also if they currently received a PPP financing. Keep in mind, though, that the ERC will just relate to salaries not made use of for the PPP.
maintain a 20% decrease in gross invoices .
A federal government authority required complete or partial shutdown of your organization during 2020 or 2021. This includes your procedures being restricted by commerce, failure to take a trip or constraints of group meetings.
- Gross invoice decrease standards is various for 2020 and also 2021, however is measured against the current quarter as contrasted to 2019 pre-COVID amounts:
- A government authority called for complete or partial shutdown of your business during 2020 or 2021. This includes your operations being limited by business, failure to take a trip or limitations of group conferences.
- Gross invoice reduction criteria is different for 2020 and also 2021, but is gauged against the existing quarter as contrasted to 2019 pre-COVID amounts.
Do we still qualify if we remained open during the pandemic?
Yes. To certify, your organization should satisfy either one of the complying with criteria:
- Experienced a decline in gross receipts by 20%, or
- Needed to transform company procedures because of federal government orders
Lots of things are considered as modifications in company operations, consisting of changes in task functions as well as the purchase of extra protective equipment.