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.
Just how It Functions
Even if you don't own a company, be sure to share this video with organization owners you understand, this video might literally be worth tens of thousands of dollars for them. And if you are a business owner and after you view this video you desire 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 email, [email protected], tell 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 due to the fact that you can take this credit against your payroll taxes you pay by decreasing your needed employment 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.
Because that's the things your CPA should fret 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 require to understand 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 informed and take ownership of your own tax circumstances, of your service's tax circumstance to produce more money flow in your organization and more wealth for yourself.
About Employee Retention Ertc Credit
Alright, now let's dig into this and let's talk about the employee retention credit or the ERC as some folks like to call it, before I get into this, I desire to state that absolutely nothing in this video is to be taken as legal or tax guidance, this video is for general informative purposes only, yes, I am a CPA and a tax expert, however I am not your CPA nor your tax professional unless you have engaged my company. Another disclaimer here, for purposes of this video I am assuming that if you're watching this you are a small company owner, which for employee retention credit functions indicates one hundred or less staff members for functions of the 2020 credit and 5 hundred or less employees 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 may deal with a regional tax specialist who is so neck-deep in income tax return right now since the government extended the tax deadline to May 17 or volume is just the nature of their company that your tax expert hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so lucrative for company owners in 2021 and why weren't we talking about it in 2020, it's been around since 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 been around given that the CARES Act that was passed over a year ago in March 2020, but the employee retention credit didn't get much love last year in 2020 due to the fact that of the PPP, the Paycheck Protection Program. Originally, in 2020, if you got a PPP loan as a company, you were not qualified for the employee retention credit.
Basically the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular lady with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for service owners in 2021. Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Ertc Credit
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 workers and then turn around and claim 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 full PPP forgiveness however also maximize your employee retention credit.
Likewise, for PPP forgiveness, you desire to fill up that payroll bucket with as many costs as possible that do not count for employee retention credit purposes. You can't claim the employee retention credit on state joblessness insurance contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd want to dispose all your state unemployment insurance contributions on your PPP forgiveness application to leave as much regular wages 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 federal government provide you a reduction for these earnings that they currently offered you a credit for? Alright, sorry for getting a little sidetracked there, I simply enjoy talking about this things, but 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.
However 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 indicates far more organizations will certify. My business, for example, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
I didn't certify for the 2020 employee retention credit initially, since I got first round of PPP money and 2nd because 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 organization qualifies. For 2021, for any quarter, you can choose to use the lookback quarter, implying that, for example, even if your Q1 2021 gross invoices aren't at least 20% lower than your Q1 2019 gross invoices, 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 get approved for Q1 2021 based on Q1 2021's gross receipts, you will also qualify for Q2 2021 since you certified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so basically if you just certify for Q1 and Q3 2021, you also get approved for Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decrease in revenue, you can certify for the employee retention credit if you were needed to completely 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 during that period of full or partial shutdown.
Common example, you own a restaurant, and your governor signed an executive order mentioning 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 brand-new laws, making PPP recipients qualified for the employee retention credit though not on the exact same wages and making more organizations eligible through the 20% decline limit rather than the 50% decrease threshold, but the 2021 credit is also more profitable than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified wages per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per employee ... for that whole time duration? 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 talking about an optimum credit of $7,000 per staff member per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per employee.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to choose the finest 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 just enjoy talking about this things, but 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 qualify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, since I got very first round of PPP money and second because my business didn't suffer that big 50% decline needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Not only are more businesses qualified for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the exact same wages and making more organizations eligible through the 20% decrease threshold rather than the 50% decline 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 because for 2021, the credit is equivalent to 70% of qualified earnings per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per employee ... for that whole time duration?
How to Start
The very best way is to function with a no-risk, contingency-based expense financial savings firm. That will negotiate on behalf of their clients to obtain the very best rates feasible for their existing clients. They will examine old billings for errors obtaining for their clients reimbursements and also tax credits. They can raise the earnings as well as general assessment of their clients companies.
Assistance offered can include:
Committed professionals that will interpret extremely complex program regulations and also will certainly be readily available to address your questions, including:
Exactly how does the PPP financing element right into the ERC?
What are the differences in between the 2020 and also 2021 programs and also how does it put on your company?
What are aggregation policies for bigger, multi-state employers, and also exactly how do I interpret numerous states executive orders?
Just how do part-time, Union, as well as tipped employees affect the quantity of my refunds?
Detailed assessment regarding your qualification
Comprehensive analysis of your claim
Assistance on the declaring process and also documentation
Certain program know-how that a normal certified public accountant or payroll processor could not be well-versed in
Fast as well as smooth end-to-end process, from eligibility to declaring and receiving reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Start? Its Simple.
1. Whichever company you pick to work with will certainly establish whether your service qualifies for the ERC.
2. They will examine your claim and compute the optimum amount you can receive.
3. Their group guides you via the declaring process, from starting to finish, consisting of appropriate documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and right on September 30, 2021, for eligible organizations.
You can get reimbursements for 2020 as well as 2021 after December 31st of this year, into 2022 as well as 2023. And also potentially past after that too.
Many businesses have received reimbursements, and also others, along with reimbursements, additionally certified to continue obtaining ERC in every payroll they process through December 31, 2021, at about 30% of their payroll expense.
Some services have gotten refunds from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now get approved for the ERC also if they currently got a PPP finance. Note, though, that the ERC will just use to wages not utilized for the PPP.
sustain a 20% decrease in gross invoices .
A government authority required full or partial closure of your business during 2020 or 2021. This includes your operations being restricted by commerce, inability to take a trip or constraints of group meetings.
- Gross receipt reduction standards is various for 2020 as well as 2021, yet is measured against the current quarter as contrasted to 2019 pre-COVID quantities:
- A government authority needed full or partial closure of your company during 2020 or 2021. This includes your procedures being limited by commerce, failure to travel or limitations of group conferences.
- Gross receipt reduction criteria is different for 2020 and also 2021, but is determined versus the existing quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we remained open throughout the pandemic?
Yes. To qualify, your company needs to satisfy either among the following standards:
- Experienced a decrease in gross receipts by 20%, or
- Needed to change company procedures as a result of government orders
Lots of products are thought about as changes in service procedures, including changes in work functions as well as the purchase of extra protective equipment.