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
This is huge, a great deal of small company owners don't understand about this, or they've heard about it, but they do not know much about it, even many tax specialists don't know the ins and outs of this thing because it's new and a lot of these modificationsthat are helpful to business owners took place in the middle of tax season. In this video I'm going to dig into the employee retention credit, why it's so profitable now in 2021, more rewarding, far more lucrative, in reality now than it was in 2020, 5x more profitable at least. Even if you don't own a service, be sure to share this video with organization owners you understand, this video could actually be worth tens of thousands of dollars for them. And if you are a company owner and after you view this video you desire 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], tell me a little about your company and your ballpark year-over-year income, 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 lowering your required work 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.
Since that's the stuff your CPA ought to worry about, I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll stuff. In this video I desire to inform you what you need to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you told me about this?" so you can be notified and take ownership of your own tax situations, of your business's tax scenario to create more money circulation in your organization and more wealth on your own.
About Employee Retention 2021 Ertc 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 enter into this, I wish to say that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for general informative functions only, yes, I am a tax and a certified public accountant professional, however I am not your CPA nor your tax professional unless you have actually engaged my company as such. Another disclaimer here, for purposes of this video I am presuming that if you're enjoying this you are a little company owner, which for employee retention credit purposes indicates one hundred or less employees for purposes of the 2020 credit and five hundred or less staff members for functions of the 2021 credit, if you have a business with over five 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 company owners who might deal with a regional tax expert who is so neck-deep in income tax return today since the government extended the tax deadline to May 17 or volume is just the nature of their company that your tax expert hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so lucrative for business owners in 2021 and why weren't we talking about it in 2020, it's been around since then, 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 actually 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 in 2015 in 2020 since of the PPP, the Paycheck Protection Program. Originally, in 2020, if you got a PPP loan as an employer, you were not eligible for the employee retention credit.
Essentially the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular lady 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 2021 Ertc Qualifications
Reason, the employee retention credit for both 2020 and 2021 is now readily 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 claim the employee retention credit on those earnings. 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 full PPP forgiveness but also optimize your employee retention credit.
Likewise, for PPP forgiveness, you want to fill up that payroll container with as many costs as possible that do not count for employee retention credit functions. For instance, 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 unemployment insurance contributions on your PPP forgiveness application to leave as much common wages as possible to take the employee retention credit on.
Another thing to note is you can't deduct the incomes you claimed the employee retention credit on, and that makes sense as well, why should the government offer you a deduction for these earnings that they currently gave 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 reason why the employee retention credit is more attractive now than it was last year, and that is that it's simpler to qualify for the employee retention credit in 2021.
But in 2021, for a quarter to qualify for the employee retention credit, you just require to show a 20% decrease in gross receipts compared to the exact same calendar quarter in 2019. So this means much more companies will qualify. My organization, for instance, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
I didn't qualify for the 2020 employee retention credit initially, since I got very first round of PPP cash and second since my company didn't suffer that large 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my service certifies. Likewise, for 2021, for any quarter, you can elect to use 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 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. Ramification here is that if you get approved for Q1 2021 based upon Q1 2021's gross receipts, you will likewise get approved for Q2 2021 because you qualified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just receive Q1 and Q3 2021, you also receive Q2 and Q4 based upon the lookback. Also, even if you didn't have an adequate decline in profits, you can get approved for the employee retention credit if you were required to totally or partly suspend operations in your organization 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 partial or complete shutdown.
Common example, you own a restaurant, and your guv signed an executive order mentioning that you require to close down indoor dining. That is an example of a partial shutdown. Not just are more companies 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 very same earnings and making more businesses eligible through the 20% decrease limit rather than the 50% decline threshold, but the 2021 credit is also more financially rewarding 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 equal to 50% of all certified incomes you paid workers in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in salaries for that whole period. So the optimum 2020 credit per employee was $5,000. Okay, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit amounts to 70% of qualified incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per worker ... for that whole time period? 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 incomes per employee per quarter, so we're talking about an optimum credit of $7,000 per worker per quarter. $7,000 times four is $28,000 if you're qualified all 4 quarters. That's right, folks, the optimum 2021 employee retention credit is $28,000 per staff member. That's huge. That's a blessing to many entrepreneur right now. You see what I indicate 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, qualified salaries includes employer-paid medical insurance premiums.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to choose the best covered duration that will get you full PPP forgiveness but also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just love talking about this things, 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 much 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 very first round of PPP cash and second due to the fact that my organization 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. Not just are more organizations eligible for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the very same salaries and making more organizations eligible through the 20% decrease limit rather than the 50% decline threshold, but the 2021 credit is also more profitable than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of qualified salaries per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per worker ... for that entire time duration?
Exactly How to Start
The best means is to collaborate with a no-risk, contingency-based expense financial savings firm. That will certainly discuss in support of their customers to get the finest prices feasible for their existing clients. They will certainly audit old billings for errors obtaining for their customers reimbursements as well as tax credits. They can boost the success and also general evaluation of their customers organizations.
Services provided can include:
Devoted specialists that will certainly interpret extremely complicated program policies and also will be offered to answer your concerns, including:
Exactly how does the PPP loan factor into the ERC?
What are the distinctions between the 2020 as well as 2021 programs and exactly how does it relate to your organization?
What are aggregation regulations for larger, multi-state companies, as well as exactly how do I analyze numerous states executive orders?
Exactly how do part-time, Union, and also tipped employees influence the amount of my reimbursements?
Detailed evaluation regarding your eligibility
Comprehensive analysis of your case
Assistance on the claiming process as well as paperwork
Specific program experience that a normal certified public accountant or pay-roll processor may not be well-versed in
Smooth and also quick end-to-end procedure, from eligibility to asserting and also obtaining reimbursements
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|Finance Pro Plus
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Ready To Start? Its Simple.
1. Whichever company you pick to work with will certainly determine whether your business qualifies and gets approvel for the ERC.
2. They will certainly evaluate your claim and calculate the optimum amount you can obtain.
3. Their group overviews you with the asserting process, from beginning to finish, consisting of correct documents.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 as well as right on September 30, 2021, for qualified companies.
You can obtain reimbursements for 2020 and 2021 after December 31st of this year, right into 2022 and 2023. And potentially beyond after that too.
Many companies have received reimbursements, and also others, along with reimbursements, also qualified to proceed obtaining ERC in every pay-roll they refine to December 31, 2021, at close to 30% of their pay-roll cost.
Some companies have actually received refunds from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can currently receive the ERC even if they already obtained a PPP finance. Note, however, that the ERC will just relate to wages not utilized for the PPP.
Do we still accredit if we did not incur a 20% decrease in gross billings .
A government authority required partial or complete closure of your business throughout 2020 or 2021. This includes your procedures being limited by commerce, lack of ability to take a trip or constraints of team conferences.
- Gross receipt reduction criteria is different for 2020 as well as 2021, however is determined against the present quarter as contrasted to 2019 pre-COVID amounts:
- A federal government authority called for partial or full closure of your business throughout 2020 or 2021. This includes your procedures being restricted by business, failure to take a trip or restrictions of team conferences.
- Gross receipt reduction standards is different for 2020 as well as 2021, however is determined versus the present quarter as contrasted to 2019 pre-COVID quantities.
Do we still qualify if we continued to be open throughout the pandemic?
Yes. To qualify, your organization needs to meet either among the complying with requirements:
- Experienced a decrease in gross receipts by 20%, or
- Had to transform business procedures due to government orders
Many items are thought about as modifications in business procedures, consisting of changes in work duties as well as the acquisition of extra safety tools.