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 Works
Even if you do not own an organization, be sure to share this video with organization owners you know, this video could literally be worth tens of thousands of dollars for them. And if you are a business owner and after you see 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 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 because you can take this credit against your payroll taxes you pay by reducing your required employment 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.
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 ought to worry about. In this video I wish to inform you what you need to know so you can go to your CPA and say, "Hey, what about this employee retention credit, why haven't you told me about this?" so you can be notified and take ownership of your own tax circumstances, of your service's tax circumstance to produce more capital in your service and more wealth for yourself.
About Employee Retention 2021 Erc Calculation
Alright, now let's go into this and let's discuss the employee retention credit or the ERC as some folks like to call it, prior to I enter into this, I want to state that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for general informational purposes just, 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 as such. Another disclaimer here, for functions of this video I am assuming that if you're watching this you are a little business owner, which for employee retention credit functions implies one hundred or fewer workers for functions of the 2020 credit and five hundred or fewer employees for functions of the 2021 credit, if you have a company with over 5 hundred staff members I imagine you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small company owners who may work with a local tax specialist who is so neck-deep in income tax return today because the federal government extended the tax deadline to May 17 or volume is simply the nature of their organization 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 business owners in 2021 and why weren't we talking about it in 2020, it's been around considering that then, considering that 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 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. Initially, in 2020, if you got a PPP loan as an employer, you were not eligible for the employee retention credit.
But the stimulus bill passed in December, the Consolidated Appropriations Act, along with the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it far more attractive. Generally the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular lady with unkempt eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for company owners in 2021. Why? Why is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a couple of factors.
Why Employee Retention 2021 Erc Calculation
Reason, 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 employees and then turn around and declare the employee retention credit on those earnings. The federal government doesn't look too fondly on paying your payroll for you through the PPP and then you claiming a credit versus the taxes you pay the government on those wages that the federal government spent for you. That makes sense. Now, there's some preparation 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 duration that will get you full PPP forgiveness however likewise optimize your employee retention credit.
Also, for PPP forgiveness, you wish to fill up that payroll pail with as many expenses as possible that do not count for employee retention credit functions. For example, you can't declare the employee retention credit on state unemployment insurance coverage contributions, but state joblessness insurance contributions count towards PPP forgiveness, see? So you 'd wish to dispose all your state joblessness insurance contributions on your PPP forgiveness application to leave as much ordinary salaries as possible to take the employee retention credit on.
So this can get really technical really fast and it's very scenario specific in regards to optimizing PPP vs. ERC and my company has tools to figure this things out for you, I'm not going to dig into all that here, however feel in one's bones that you truly need to do the mathematics when doing your PPP forgiveness to ensure you're not leaving anything on the table in terms of the employee retention credit. Another thing to note is you can't subtract the earnings you declared the employee retention credit on, and that makes sense as well, why should the federal government offer you a reduction for these wages 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 love speaking about this stuff, but 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 receive the employee retention credit in 2021. In 2020, for a quarter to get approved for the employee retention credit, you had to reveal a 50% reduction in gross receipts compared to the same calendar quarter in 2019.
In 2021, for a quarter to certify for the employee retention credit, you only require to show a 20% decrease in gross invoices compared to the exact same calendar quarter in 2019. This indicates far more services will certify. My organization, for instance, 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 qualify for the 2020 employee retention credit initially, due to the fact that I got first round of PPP cash and second because my business didn't suffer that big 50% decline needed 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 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 invoices, 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 receive 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.
Exact same thing for Q2 to Q3 and Q3 to Q4, so generally if you simply 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 qualify for the employee retention credit if you were required to completely or partly 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 during that period of full or partial shutdown.
Common example, you own a dining establishment, and your guv signed an executive order stating that you require to shut down indoor dining. That is an example of a partial shutdown. Not just are more businesses eligible for the employee retention credit thanks to these brand-new laws, making PPP recipients qualified for the employee retention credit though not on the exact same salaries and making more organizations eligible through the 20% decline threshold rather than the 50% decline limit, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of qualified incomes per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per staff member ... for that entire time period? For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in salaries per staff member per quarter, so we're talking about a maximum credit of $7,000 per employee per quarter. That's right, folks, the optimum 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 require to choose the best covered period that will get you complete PPP forgiveness but likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just love talking about this stuff, 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 easier to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, because I got very first round of PPP cash and 2nd because my business didn't suffer that large 50% decline needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. Not only are more organizations eligible for the employee retention credit thanks to these brand-new laws, making PPP recipients qualified for the employee retention credit though not on the very same salaries and making more companies eligible through the 20% decline threshold rather than the 50% decline threshold, but the 2021 credit is likewise more rewarding than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified incomes per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per employee ... for that whole time duration?
Just How to Begin
That will work out on part of their clients to get the best rates possible for their existing customers. They will certainly investigate old invoices for errors getting their clients reimbursements as well as credits.
Assistance provided can include:
Devoted professionals that will analyze extremely intricate program guidelines and also will certainly be offered to answer your inquiries, including:
Exactly how does the PPP lending aspect right into the ERC?
What are the differences between the 2020 as well as 2021 programs and also just how does it put on your service?
What are aggregation regulations for bigger, multi-state employers, as well as exactly how do I analyze several states executive orders?
Exactly how do part-time, Union, as well as tipped staff members impact the quantity of my reimbursements?
Extensive examination regarding your eligibility
Extensive analysis of your claim
Support on the declaring process and also documents
Certain program proficiency that a routine certified public accountant or pay-roll cpu might not be well-versed in
Rapid and also smooth end-to-end process, 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
Ready To Start? Its Simple.
1. Whichever company you choose to work with will figure out whether your service qualifies for the ERC.
2. They will analyze your claim and calculate the optimum amount you can get.
3. Their group guides you via the asserting procedure, from beginning to end, including correct documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 as well as ends on September 30, 2021, for eligible employers.
You can use for refunds for 2020 and also 2021 after December 31st of this year, into 2022 and 2023. And possibly beyond then also.
Many companies have received refunds, as well as others, in addition to reimbursements, also qualified to proceed obtaining ERC in every payroll they process to December 31, 2021, at close to 30% of their pay-roll cost.
Some businesses have actually 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 currently get the ERC also if they currently got a PPP funding. Note, however, that the ERC will just put on wages not utilized for the PPP.
Do we still accredit if we did not incur a 20% decline in gross billings .
A government authority required partial or full shutdown of your service during 2020 or 2021. This includes your procedures being limited by business, inability to take a trip or constraints of team conferences.
- Gross invoice decrease standards is various for 2020 and also 2021, yet is measured against the present quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority called for partial or complete closure of your business throughout 2020 or 2021. This includes your operations being limited by commerce, inability to travel or constraints of team conferences.
- Gross invoice reduction standards is different for 2020 as well as 2021, yet is measured versus the existing quarter as compared to 2019 pre-COVID quantities.
Do we still certify if we stayed open throughout the pandemic?
Yes. To certify, your company needs to satisfy either among the following criteria:
- Experienced a decrease in gross receipts by 20%, or
- Had to transform organization procedures due to federal government orders
Numerous items are taken into consideration as changes in company procedures, including shifts in work duties as well as the purchase of additional safety tools.