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
Even if you do not own an organization, be sure to share this video with service owners you understand, this video could literally be worth tens of thousands of dollars for them. And if you are a service owner and after you watch 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 e-mail, [email protected], inform me a little about your business and your ballpark year-over-year income, and let's see if we can get some more money back in your pocket since you can take this credit against your payroll taxes you pay by minimizing 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.
I am not going to get into the complexities of that form here or the Form 941 and all the payroll things since that's the stuff your CPA ought to fret about. In this video I wish to inform you what you require to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why haven't you informed me about this?" You can be notified and take ownership of your own tax situations, of your business's tax circumstance to generate more cash circulation in your organization and more wealth for yourself.
About Employee Retention Tax Credit Reinstatement Act
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, prior to I enter into this, I desire to say that absolutely nothing in this video is to be taken as legal or tax guidance, this video is for basic informative purposes only, yes, I am a CPA and a tax professional, however I am not your CPA nor your tax professional unless you have actually engaged my firm as such. Another disclaimer here, for purposes of this video I am presuming that if you're watching this you are a little company owner, which for employee retention credit purposes indicates one hundred or fewer employees for functions of the 2020 credit and five hundred or fewer employees for purposes of the 2021 credit, if you have a business with over 5 hundred workers 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 regional tax specialist who is so neck-deep in tax returns today due to the fact that the federal government extended the tax deadline to May 17 or volume is simply the nature of their company 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 lucrative for service owners in 2021 and why weren't we talking about it in 2020, it's been around since then, given 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 because of the PPP, the Paycheck Protection Program.
But the stimulus costs passed in December, the Consolidated Appropriations Act, in addition to the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more appealing. So basically the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular lady with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for entrepreneur 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 few reasons.
Why Employee Retention Tax Credit Reinstatement Act
Very first reason, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, however of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your staff members and after that reverse and declare the employee retention credit on those incomes as well. The government does not look too fondly on paying your payroll for you through the PPP and then you claiming a credit versus the taxes you pay the federal government on those wages 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 require to choose the finest covered duration that will get you complete PPP forgiveness but also optimize your employee retention credit.
Likewise, for PPP forgiveness, you want to fill that payroll bucket with as many costs as possible that don't count for employee retention credit purposes. For instance, you can't declare the employee retention credit on state unemployment insurance contributions, but state joblessness insurance contributions count towards PPP forgiveness, see? So you 'd want to dispose 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.
So this can get extremely technical really fast and it's extremely situation particular in terms of enhancing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to dig into all that here, but feel in one's bones that you really need to do the mathematics when doing your PPP forgiveness to make sure you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't subtract the earnings you claimed the employee retention credit on, and that makes sense too, why should the government offer you a reduction for these incomes that they already offered you a credit for? So essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply love discussing this things, however let's discuss another reason the employee retention credit is more attractive now than it was last year, which is that it's simpler to get approved for the employee retention credit in 2021. In 2020, for a quarter to certify for the employee retention credit, you had to reveal a 50% decline in gross receipts compared to the very same calendar quarter in 2019.
But in 2021, for a quarter to receive the employee retention credit, you just require to reveal a 20% decline in gross receipts compared to the same calendar quarter in 2019. So this means much more services will certify. My service, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
So I didn't get approved for the 2020 employee retention credit initially, due to the fact that I got preliminary of PPP money and 2nd since my company didn't suffer that big 50% decline needed to qualify for the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my service 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 functions 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 receive Q2 2021 because you certified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply receive Q1 and Q3 2021, you also qualify for Q2 and Q4 based on the lookback. Likewise, even if you didn't have an enough decline in revenue, you can get approved for the employee retention credit if you were needed to totally or partly suspend operations in your company throughout 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 full shutdown.
Typical example, you own a restaurant, and your guv signed an executive order specifying that you need to shut down indoor dining. That is an example of a partial shutdown. Not just are more businesses 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 organizations eligible through the 20% decline limit rather than the 50% decline threshold, however the 2021 credit is likewise more rewarding than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit was equivalent to 50% of all certified incomes for 2020, the employee retention credit was equivalent to 50% of all certified wages you paid workers in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in earnings for that entire time duration. The maximum 2020 credit per staff member was $5,000. Not bad, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit amounts to 70% of qualified wages per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that whole 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 a maximum credit of $7,000 per worker per quarter. If you're qualified all 4 quarters, $7,000 times 4 is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per employee. That's substantial. That's a blessing to lots of service owners today. You see what I imply now, right, how the employee retention credit has gone from unsightly duckling in 2020 to beautiful swan in 2021? And by the method, by the way, qualified salaries consists of employer-paid health insurance coverage premiums.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to select the finest covered period that will get you full PPP forgiveness however also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just love 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. 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 2nd due to the fact that my company 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 qualifies. Not just are more companies qualified 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 services eligible through the 20% decrease threshold rather than the 50% decline 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 qualified salaries per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that entire time period?
How to Begin
That will negotiate on part of their clients to get the ideal prices possible for their existing customers. They will audit old invoices for errors getting their clients reimbursements as well as tax credits.
Services provided can include:
Committed experts that will translate very complicated program policies as well as will be offered to answer your questions, including:
How does the PPP lending factor right into the ERC?
What are the differences in between the 2020 and also 2021 programs as well as how does it put on your business?
What are gathering guidelines for bigger, multi-state employers, and also how do I translate numerous states executive orders?
How do part-time, Union, and tipped workers impact the amount of my refunds?
Comprehensive examination concerning your qualification
Extensive evaluation of your claim
Assistance on the claiming procedure and also documentation
Particular program experience that a regular certified public accountant or payroll processor could not be well-versed in
Smooth and also rapid end-to-end procedure, from qualification to asserting as well as receiving reimbursements
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Start? Its Simple.
1. Whichever firm you pick to work with will figure out whether your organization certifies for the ERC.
2. They will certainly examine your claim as well as calculate the optimum quantity you can get.
3. Their team guides you with the declaring process, from starting to finish, including correct documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 as well as right on September 30, 2021, for qualified employers.
You can obtain reimbursements for 2020 as well as 2021 after December 31st of this year, right into 2022 and also 2023. And also potentially beyond after that as well.
Many companies have received refunds, as well as others, in enhancement to refunds, likewise qualified to continue receiving ERC in every payroll they process through December 31, 2021, at close to 30% of their pay-roll expense.
Some organizations have gotten refunds from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now get approved for the ERC even if they already obtained a PPP car loan. Note, however, that the ERC will only put on incomes not utilized for the PPP.
Do we still certify if we did not) incur a 20% decline in gross billings .
A federal government authority required full or partial shutdown of your company throughout 2020 or 2021. This includes your operations being restricted by business, inability to take a trip or restrictions of team conferences.
- Gross invoice decrease criteria is various for 2020 as well as 2021, however is measured against the current quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority required full or partial closure of your business throughout 2020 or 2021. This includes your procedures being limited by business, failure to travel or limitations of team conferences.
- Gross invoice decrease standards is different for 2020 as well as 2021, but is gauged versus the present quarter as contrasted to 2019 pre-COVID amounts.
Do we still qualify if we stayed open during the pandemic?
Yes. To qualify, your service should fulfill either one of the complying with requirements:
- Experienced a decrease in gross invoices by 20%, or
- Needed to transform organization operations because of federal government orders
Many things are thought about as adjustments in organization procedures, including shifts in task roles and also the acquisition of extra safety devices.