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
Even if you do not own a service, be sure to share this video with service owners you know, this video could actually be worth 10s of thousands of dollars for them. And if you are an organization owner and after you watch this video you desire to talk with me and a member of my team, who will also 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 earnings, and let's see if we can get some more money back in your pocket because you can take this credit against your payroll taxes you pay by minimizing 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.
Since that's the stuff your CPA must stress about, I am not going to get into the complexities of that kind here or the Form 941 and all the payroll stuff. In this video I want 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?" You can be notified and take ownership of your own tax circumstances, of your organization's tax circumstance to produce more cash circulation in your business and more wealth for yourself.
About Employee Retention Ertc
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, prior to I enter this, I want to state that absolutely nothing in this video is to be taken as legal or tax recommendations, this video is for general informative purposes just, yes, I am a CPA and a tax expert, however 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 seeing this you are a small company owner, which for employee retention credit functions indicates one hundred or fewer workers for functions of the 2020 credit and five hundred or fewer staff members for functions of the 2021 credit, if you have a business with over 5 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 may deal with a regional tax professional who is so neck-deep in tax returns today due to the fact that the government extended the tax due date to May 17 or volume is just the nature of their service that your tax professional hasn't had the time to dig 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 since then, considering that the CARES Act? Yes, the employee retention credit has been around since 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.
The stimulus expense 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. Essentially the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular woman with thick glasses and unkempt eyebrows and her hair up in 2020 to the belle of the ball for service 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 Ertc
Reason, the employee retention credit for both 2020 and 2021 is now 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 workers and then turn around and declare 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 need to choose the best covered period that will get you full PPP forgiveness but also maximize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll bucket with as numerous costs as possible that don't count for employee retention credit purposes. You can't declare the employee retention credit on state unemployment insurance contributions, but state joblessness insurance contributions count toward PPP forgiveness, see? So you 'd desire to dump all your state joblessness insurance contributions on your PPP forgiveness application to leave as much normal salaries as possible to take the employee retention credit on.
Another thing to note is you can't deduct the salaries you claimed the employee retention credit on, and that makes sense as well, why should the government provide you a deduction for these salaries that they currently gave you a credit for? Alright, sorry for getting a little sidetracked there, I just like 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 certify for the employee retention credit in 2021.
In 2021, for a quarter to qualify for the employee retention credit, you just require to show a 20% decrease in gross invoices compared to the same calendar quarter in 2019. This implies far more organizations will qualify. My organization, for instance, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
So I didn't receive the 2020 employee retention credit initially, due to the fact that I got very first round of PPP money and 2nd due to the fact that my service didn't suffer that large 50% decrease required to receive the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my company qualifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, suggesting that, for example, even if your Q1 2021 gross invoices aren't at least 20% lower than your Q1 2019 gross receipts, you can compare for purposes of determining eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you qualify for Q1 2021 based on Q1 2021's gross invoices, you will likewise qualify for Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so essentially if you simply receive Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Also, even if you didn't have a sufficient decline in earnings, you can receive the employee retention credit if you were needed to completely 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 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 organizations eligible for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the same salaries and making more businesses eligible through the 20% decline threshold rather than the 50% decline limit, but the 2021 credit is also more lucrative than the 2020 credit.
This is because for 2020, the employee retention credit amounted to 50% of all certified incomes for 2020, the employee retention credit was equivalent to 50% of all certified earnings you paid workers in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in salaries for that whole time duration. So the maximum 2020 credit per staff member was $5,000. Okay, but that's absolutely nothing compared to the 2021 credit since for 2021, the credit amounts to 70% of certified incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that entire 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 earnings per worker per quarter, so we're discussing a maximum credit of $7,000 per worker per quarter. $7,000 times four is $28,000 if you're eligible all four quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker. That's big. That's a godsend to numerous entrepreneur today. So you see what I indicate now, right, how the employee retention credit has gone from awful duckling in 2020 to stunning swan in 2021, right? And by the method, by the method, certified earnings consists of 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 require to pick the best covered period that will get you complete PPP forgiveness but also 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 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. I didn't certify for the 2020 employee retention credit first, since I got first round of PPP money and second since my organization 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 service certifies. Not only are more services qualified for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the exact same earnings and making more services eligible through the 20% decline threshold 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 due to the fact that 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?
Exactly How to Start
The very best means is to deal with a no-risk, contingency-based expense savings company. That will discuss in support of their customers to obtain the very best costs possible for their existing clients. They will certainly investigate old billings for errors getting their customers reimbursements and also tax credits. They can increase the profitability and general appraisal of their customers organizations.
Services offered can include:
Devoted experts that will interpret highly intricate program guidelines as well as will certainly be readily available to answer your inquiries, including:
Exactly how does the PPP loan element right into the ERC?
What are the differences in between the 2020 and 2021 programs and also how does it apply to your service?
What are gathering guidelines for bigger, multi-state companies, as well as exactly how do I translate numerous states executive orders?
Exactly how do part-time, Union, and tipped employees influence the quantity of my reimbursements?
Complete analysis concerning your eligibility
Detailed analysis of your claim
Assistance on the declaring process and also paperwork
Details program proficiency that a routine certified public accountant or payroll processor could not be well-versed in
Smooth and rapid end-to-end process, from qualification to asserting and also obtaining reimbursements
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Ready To Obtain Started? Its Simple.
1. Whichever firm you choose to work with will certainly establish whether your company certifies for the ERC.
2. They will certainly examine your claim and calculate the optimum quantity you can obtain.
3. Their team overviews you through the claiming procedure, from beginning to finish, consisting of appropriate documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 and also 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 also possibly beyond then as well.
Many organizations have received reimbursements, and others, along with reimbursements, also qualified to continue obtaining ERC in every pay-roll they refine through December 31, 2021, at about 30% of their payroll cost.
Some services have obtained reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, businesses can now get approved for the ERC also if they already received a PPP financing. Note, though, that the ERC will only use to incomes not made use of for the PPP.
Do we still qualify if we did not) sustain a 20% decline in gross billings .
A federal government authority called for partial or full shutdown of your service during 2020 or 2021. This includes your operations being limited by business, failure to travel or limitations of team conferences.
- Gross receipt reduction criteria is various for 2020 and also 2021, yet is measured against the existing quarter as contrasted to 2019 pre-COVID amounts:
- A federal government authority needed partial or full closure of your service throughout 2020 or 2021. This includes your operations being restricted by commerce, failure to take a trip or constraints of team conferences.
- Gross invoice decrease requirements is different for 2020 and 2021, however is determined versus the present quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we continued to be open throughout the pandemic?
Yes. To certify, your service should fulfill either among the complying with requirements:
- Experienced a decline in gross receipts by 20%, or
- Had to alter company procedures as a result of federal government orders
Numerous products are taken into consideration as changes in organization operations, consisting of changes in task duties and the acquisition of additional safety tools.