Why Employee Retention Credit Application

Reason, the employee retention credit for both 2020 and 2021 is now offered 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 then turn around and declare the employee retention credit on those wages. 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 best covered duration that will get you complete PPP forgiveness however also optimize your employee retention credit.



Likewise, for PPP forgiveness, you desire to fill that payroll pail with as lots of costs as possible that don't count for employee retention credit purposes. You can't declare the employee retention credit on state joblessness insurance coverage contributions, but state unemployment insurance contributions count towards PPP forgiveness, see? You 'd desire to dispose all your state unemployment insurance contributions on your PPP forgiveness application to leave as much common 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 offer you a reduction for these incomes that they currently gave you a credit for? Alright, sorry for getting a little sidetracked there, I simply like 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 simpler to qualify 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% decline in gross invoices compared to the same calendar quarter in 2019. This implies far more organizations will certify. My organization, for instance, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.

So I didn't qualify for the 2020 employee retention credit first, because I got first round of PPP cash and second due to the fact that my organization didn't suffer that big 50% decrease needed to qualify for the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my business certifies. Likewise, for 2021, for any quarter, you can elect to use the lookback quarter, indicating that, for instance, even if your Q1 2021 gross receipts aren't at least 20% lower than your Q1 2019 gross receipts, 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 because you certified in the lookback quarter of Q1 2021.

Very same thing for Q2 to Q3 and Q3 to Q4, so essentially if you simply certify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Even if you didn't have an enough decrease in profits, you can certify for the employee retention credit if you were required 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 period of partial or complete shutdown.

Typical example, you own a restaurant, and your governor signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Not only are more companies qualified for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the same incomes 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.

Not bad, however that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of qualified wages per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that entire time duration? For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in wages 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 maximum 2021 employee retention credit is $28,000 per worker.


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 maximize your employee retention credit.



Alright, sorry for getting a little sidetracked there, I simply like talking about this things, 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 simpler to qualify 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 cash and 2nd since my business didn't suffer that large 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Not only are more organizations eligible for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the same wages and making more services eligible through the 20% decline threshold rather than the 50% decrease threshold, however the 2021 credit is also more rewarding 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 equivalent to 70% of qualified wages per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per staff member ... for that whole time duration?