Why Employee Retention Ertc 2021

First factor, the employee retention credit for both 2020 and 2021 is now offered to PPP recipients, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your staff members and then reverse and declare the employee retention credit on those salaries also. The government does not look too fondly on paying your payroll for you through the PPP and after that you claiming a credit against the taxes you pay the government on those wages that the federal government spent for you. So 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 select the best covered period that will get you full PPP forgiveness however likewise maximize your employee retention credit.



Likewise, for PPP forgiveness, you desire to fill up that payroll container with as many expenses as possible that don't count for employee retention credit purposes. For instance, you can't declare the employee retention credit on state joblessness insurance coverage contributions, however state joblessness insurance coverage contributions count toward PPP forgiveness, see? You 'd desire to dispose all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much ordinary earnings as possible to take the employee retention credit on.

This can get really technical really quick and it's very circumstance specific in terms of enhancing PPP vs. ERC and my firm has tools to figure this things out for you, I'm not going to dig into all that here, however simply understand that you actually have to do the math when doing your PPP forgiveness to make sure you're not leaving anything on the table in terms of the employee retention credit. Another thing to note is you can't subtract the wages you claimed the employee retention credit on, which makes good sense as well, why should the government provide you a deduction for these incomes that they already gave you a credit for? So basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just like talking about this things, but let's speak about another factor why the employee retention credit is more attractive now than it was in 2015, which is that it's much easier to get approved for the employee retention credit in 2021. In 2020, for a quarter to certify for the employee retention credit, you needed to show a 50% reduction in gross receipts compared to the same calendar quarter in 2019.

However in 2021, for a quarter to qualify for the employee retention credit, you just need to show a 20% reduction in gross receipts compared to the same calendar quarter in 2019. So this indicates much more businesses will certify. My company, 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, because I got very first round of PPP money and second since my company didn't suffer that big 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. For 2021, for any quarter, you can choose to utilize 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 identifying eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you get approved for Q1 2021 based on Q1 2021's gross receipts, you will likewise certify 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 basically if you simply certify for Q1 and Q3 2021, you likewise certify for Q2 and Q4 based on the lookback. Likewise, even if you didn't have an adequate decrease in revenue, you can qualify for the employee retention credit if you were needed to totally or partly suspend operations in your service 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 during that period of full or partial shutdown.

Typical example, you own a dining establishment, and your guv signed an executive order specifying that you require to shut 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 brand-new laws, making PPP receivers eligible for the employee retention credit though not on the exact same incomes and making more services eligible through the 20% decrease limit rather than the 50% decrease threshold, but the 2021 credit is also more financially rewarding than the 2020 credit.

This is because for 2020, the employee retention credit was equal to 50% of all qualified wages for 2020, the employee retention credit amounted to 50% of all qualified earnings you paid employees in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in incomes for that whole time period. The maximum 2020 credit per worker was $5,000. Okay, however that's nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified incomes per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per employee ... for that whole time period? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in earnings per worker per quarter, so we're speaking about a maximum credit of $7,000 per employee per quarter. If you're qualified all four quarters, $7,000 times 4 is $28,000. That's right, folks, the optimum 2021 employee retention credit is $28,000 per employee. That's substantial. That's a blessing to lots of service owners right now. So you see what I mean now, right, how the employee retention credit has gone from awful duckling in 2020 to beautiful swan in 2021, right? And by the method, by the way, qualified earnings includes 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 choose the finest covered period that will get you complete PPP forgiveness however likewise maximize your employee retention credit.



Alright, sorry for getting a little sidetracked there, I simply like 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. I didn't certify for the 2020 employee retention credit first, due to the fact that I got first round of PPP money and second because my business 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 service qualifies. Not only are more organizations qualified for the employee retention credit thanks to these brand-new laws, making PPP receivers qualified for the employee retention credit though not on the exact same salaries and making more services eligible through the 20% decrease threshold rather than the 50% decline threshold, but the 2021 credit is likewise more financially rewarding than the 2020 credit.

Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of certified incomes per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per worker ... for that whole time duration?