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 Works
This is big, a great deal of small company owners do not understand about this, or they've become aware of it, but they do not know much about it, even many tax specialists do not know the ins and outs of this thing due to the fact that it's new and a great deal of these changesthat are advantageous to entrepreneur took place in the middle of tax season. So in this video I'm going to dig into the employee retention credit, why it's so rewarding now in 2021, more profitable, much more lucrative, in reality now than it remained in 2020, 5x more rewarding a minimum of. Even if you don't own an organization, be sure to share this video with business 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 wish to talk with me and a member of my group, who will also be either a CPA like myself or an EA, shoot me an e-mail, [email protected], inform me a little about your company and your ballpark year-over-year earnings, 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 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.
I am not going to get into the complexities of that type here or the Form 941 and all the payroll things since that's the stuff your CPA ought to worry about. In this video I wish to tell you what you require to understand 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 circumstances, of your business's tax situation to generate more cash flow in your organization and more wealth on your own.
About Employee Retention Credit 2021
Alright, now let's dig into this and let's speak about the employee retention credit or the ERC as some folks like to call it, before I enter into this, I wish to state that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for basic informative purposes just, yes, I am a CPA and a tax expert, but I am not your CPA nor your tax expert unless you have engaged my company as such. Another disclaimer here, for purposes of this video I am presuming that if you're watching this you are a little organization owner, which for employee retention credit functions implies one hundred or less workers for purposes of the 2020 credit and 5 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 things, however I'm here for you small business owners who might deal with a regional tax specialist who is so neck-deep in tax returns right now because the government extended the tax due date to May 17 or volume is simply the nature of their business 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 financially rewarding for company owner in 2021 and why weren't we speaking about it in 2020, it's been around considering that then, given 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 actually 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 in 2015 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.
However the stimulus costs passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it much more appealing. Basically the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular woman with unkempt eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for organization 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 tell you why, a couple of reasons.
Why Employee Retention Credit 2021
First factor, the employee retention credit for both 2020 and 2021 is now available to PPP receivers, but naturally you can't double dip. You can't get PPP for the hundred thousand dollars you paid your employees and after that turn around and declare the employee retention credit on those salaries too. The federal government does not look too fondly on paying your payroll for you through the PPP and after that you declaring a credit against the taxes you pay the government on those salaries that the 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 pick the best covered period that will get you full PPP forgiveness however also optimize your employee retention credit.
Also, for PPP forgiveness, you want to fill that payroll bucket with as many expenses as possible that don't count for employee retention credit purposes. For example, you can't declare the employee retention credit on state joblessness insurance coverage contributions, however state joblessness insurance coverage contributions count towards PPP forgiveness, see? You 'd desire to dispose 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.
Another thing to note is you can't deduct the incomes 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 already offered you a credit for? Alright, sorry for getting a little sidetracked there, I just love 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 easier to certify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you just require to show a 20% reduction in gross receipts compared to the very same calendar quarter in 2019. This means far more organizations will qualify. My company, for example, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
So I didn't certify for the 2020 employee retention credit first, due to the fact that I got very first round of PPP money and second because my organization didn't suffer that big 50% decrease needed to receive the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my service certifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, suggesting 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 purposes of figuring out 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 on Q1 2021's gross invoices, you will likewise receive Q2 2021 considering that 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 qualify for Q1 and Q3 2021, you also receive Q2 and Q4 based upon the lookback. Also, even if you didn't have a sufficient decrease in earnings, you can certify for the employee retention credit if you were required to fully 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 throughout that duration of partial or complete shutdown.
Common example, you own a restaurant, and your governor signed an executive order mentioning that you require to shut down indoor dining. That is an example of a partial shutdown. 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 earnings and making more organizations eligible through the 20% decline limit rather than the 50% decline limit, however the 2021 credit is likewise 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 qualified wages for 2020, the employee retention credit was equivalent to 50% of all qualified incomes you paid staff members in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in earnings for that whole period. The optimum 2020 credit per employee was $5,000. Not bad, but that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of certified incomes per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per worker ... for that whole time duration? No. Per quarter. So for 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in incomes per worker per quarter, so we're discussing a maximum credit of $7,000 per staff member per quarter. $7,000 times 4 is $28,000 if you're eligible 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 numerous company owner today. You see what I indicate now, right, how the employee retention credit has gone from awful duckling in 2020 to lovely swan in 2021? And by the method, by the way, qualified earnings 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 select the best covered duration that will get you complete PPP forgiveness however also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, however let's talk about another factor why the employee retention credit is more attractive now than it was last year, and that is that it's much easier to qualify 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 money and 2nd since my business didn't suffer that large 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company 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 salaries and making more organizations eligible through the 20% decline limit rather than the 50% decrease limit, but the 2021 credit is likewise more financially rewarding than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified wages per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that entire time duration?
Just How to Get going
That will certainly negotiate on part of their customers to obtain the finest rates feasible for their existing customers. They will certainly audit old billings for mistakes obtaining their customers reimbursements and credits.
Solutions offered can include:
Dedicated experts that will certainly analyze very complex program guidelines and will be offered to address your concerns, including:
How does the PPP loan variable right into the ERC?
What are the distinctions between the 2020 and also 2021 programs and just how does it relate to your service?
What are aggregation rules for bigger, multi-state employers, and also just how do I translate numerous states executive orders?
Exactly how do part-time, Union, and also tipped staff members impact the amount of my reimbursements?
Detailed examination concerning your eligibility
Thorough analysis of your case
Advice on the claiming procedure and paperwork
Specific program competence that a normal CPA or pay-roll processor may not be well-versed in
Smooth and also quick end-to-end procedure, from qualification to asserting as well as getting reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
All Set To Get Started? Its Simple.
1. Whichever company you select to work with will certainly identify whether your business qualifies for the ERC.
2. They will evaluate your claim as well as calculate the maximum amount you can receive.
3. Their team overviews you through the declaring procedure, from starting to finish, including correct paperwork.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and also right on September 30, 2021, for eligible organizations.
You can obtain refunds for 2020 and also 2021 after December 31st of this year, right into 2022 and also 2023. And possibly past then too.
Many organizations have received refunds, and others, along with reimbursements, additionally qualified to proceed receiving ERC in every pay-roll they process to December 31, 2021, at around 30% of their pay-roll expense.
Some companies have actually gotten refunds from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can now get the ERC even if they currently got a PPP finance. Keep in mind, though, that the ERC will just put on earnings not made use of for the PPP.
sustain a 20% reduction in gross invoices .
A government authority needed complete or partial shutdown of your organization throughout 2020 or 2021. This includes your operations being limited by business, failure to take a trip or restrictions of group conferences.
- Gross receipt decrease standards is various for 2020 and also 2021, yet is measured versus the existing quarter as compared to 2019 pre-COVID quantities:
- A government authority called for full or partial shutdown of your company throughout 2020 or 2021. This includes your operations being limited by commerce, inability to take a trip or constraints of team meetings.
- Gross invoice reduction requirements is various for 2020 and also 2021, however is measured versus the present quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we remained open throughout the pandemic?
Yes. To certify, your service should meet either one of the complying with requirements:
- Experienced a decline in gross invoices by 20%, or
- Needed to transform company procedures as a result of federal government orders
Numerous items are considered as adjustments in organization operations, including changes in work functions and also the acquisition of added protective devices.