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
This is huge, a lot of small business owners don't learn about this, or they've heard about it, but they do not know much about it, even lots of tax specialists do not understand the ins and outs of this thing since it's new and a lot of these changesthat are useful to entrepreneur took place in the middle of tax season. In this video I'm going to dig into the employee retention credit, why it's so rewarding now in 2021, more profitable, far more lucrative, in fact now than it was in 2020, 5x more profitable at least. Even if you do not own a service, be sure to share this video with business owners you know, this video might literally be worth 10s of thousands of dollars for them. And if you are an entrepreneur and after you see this video you want 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 e-mail, [email protected], inform me a little about your business and your ballpark year-over-year earnings, and let's see if we can get some more refund in your pocket because you can take this credit against your payroll taxes you pay by lowering your required employment tax deposits or you can request an advance payment of the credit utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Since that's the stuff your CPA ought to fret about, I am not going to get into the complexities of that form here or the Form 941 and all the payroll stuff. 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?" so you can be informed and take ownership of your own tax circumstances, of your organization's tax situation to generate more capital in your service and more wealth on your own.
About Employee Retention Program
Alright, now let's go into this and let's discuss the employee retention credit or the ERC as some folks like to call it, before I enter into this, I desire to say that nothing in this video is to be taken as legal or tax recommendations, 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 functions of this video I am presuming that if you're viewing this you are a small business owner, which for employee retention credit functions implies one hundred or less workers for purposes of the 2020 credit and 5 hundred or less staff members for purposes of the 2021 credit, if you have a business with over five hundred employees I envision you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you little organization owners who might deal with a local tax specialist who is so neck-deep in tax returns right now due to the fact that the federal government extended the tax due date to May 17 or volume is simply the nature of their business that your tax specialist hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so profitable for business owners in 2021 and why weren't we talking about it in 2020, it's been around given that then, since 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 actually been around considering that the CARES Act that was passed over a year ago in March 2020, but the employee retention credit didn't get much love in 2015 in 2020 due to the fact that of the PPP, the Paycheck Protection Program. Originally, in 2020, if you received a PPP loan as an employer, you were not qualified for the employee retention credit.
Generally the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy lady with unkempt eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for company owners in 2021. Why is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Program
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 employees and then turn around and claim the employee retention credit on those salaries. If you got PPP and you are eligible 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 however also maximize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll bucket with as numerous expenses as possible that don't count for employee retention credit functions. You can't claim the employee retention credit on state joblessness insurance contributions, however state joblessness insurance coverage contributions count towards PPP forgiveness, see? 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 extremely quickly and it's extremely scenario specific in terms of optimizing PPP vs. ERC and my company has tools to figure this things out for you, I'm not going to go into all that here, however feel in one's bones that you actually have to do the mathematics when doing your PPP forgiveness to make certain 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, and that makes sense too, why should the government give you a deduction for these salaries that they currently gave you a credit for? Essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply like talking about this things, but let's speak about another reason the employee retention credit is more appealing now than it was last year, and that is that it's easier to get approved for the employee retention credit in 2021. In 2020, for a quarter to get approved for the employee retention credit, you had to reveal a 50% decline in gross invoices compared to the very same calendar quarter in 2019.
But in 2021, for a quarter to get approved for the employee retention credit, you just need to show a 20% decrease in gross receipts compared to the same calendar quarter in 2019. So this indicates much more companies will qualify. My organization, for instance, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
So I didn't receive the 2020 employee retention credit initially, since I got preliminary of PPP cash and 2nd since my service didn't suffer that large 50% decline required to receive the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my service certifies. Also, for 2021, for any quarter, you can choose to use the lookback quarter, suggesting 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 purposes of figuring out 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 invoices, you will likewise get approved for Q2 2021 given that you qualified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply receive Q1 and Q3 2021, you also certify for Q2 and Q4 based on the lookback. Likewise, even if you didn't have an enough decrease in revenue, you can qualify for the employee retention credit if you were required to totally or partially suspend operations in your company 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 complete or partial shutdown.
Common example, you own a restaurant, and your governor signed an executive order mentioning that you need to close down indoor dining. That is an example of a partial shutdown. Likewise, not just 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 same incomes and making more services eligible through the 20% decrease threshold instead of the 50% decline limit, however the 2021 credit is also more profitable than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit amounted to 50% of all qualified incomes for 2020, the employee retention credit amounted to 50% of all certified incomes you paid workers in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in wages for that entire period. The maximum 2020 credit per employee 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 incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per employee ... for that whole period? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on approximately $10,000 in salaries per employee per quarter, so we're speaking about an optimum credit of $7,000 per staff member per quarter. If you're qualified all four quarters, $7,000 times 4 is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker. That's huge. That's a godsend to lots of entrepreneur today. You see what I suggest now, right, how the employee retention credit has gone from unsightly duckling in 2020 to lovely swan in 2021? And by the way, by the method, qualified salaries consists of employer-paid medical insurance premiums.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to choose 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 just love talking about this stuff, 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 easier to certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, since I got first round of PPP money and second since my organization didn't suffer that large 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Not only are more companies eligible for the employee retention credit thanks to these brand-new laws, making PPP receivers eligible for the employee retention credit though not on the same salaries and making more organizations eligible through the 20% decrease limit rather than the 50% decline limit, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified incomes per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per staff member ... for that entire time period?
How to Begin
That will bargain on part of their clients to obtain the finest costs feasible for their existing clients. They will certainly audit old billings for errors getting their customers reimbursements and tax credits.
Solutions supplied can include:
Committed experts that will interpret extremely complicated program rules and will be readily available to answer your inquiries, including:
How does the PPP financing aspect right into the ERC?
What are the differences between the 2020 and also 2021 programs and exactly how does it apply to your business?
What are aggregation regulations for larger, multi-state companies, and just how do I analyze several states executive orders?
How do part-time, Union, and tipped workers affect the quantity of my reimbursements?
Comprehensive analysis concerning your eligibility
Extensive analysis of your case
Guidance on the claiming process and documents
Particular program knowledge that a normal certified public accountant or payroll cpu could not be well-versed in
Smooth and rapid end-to-end process, from eligibility to declaring as well as receiving reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Start? Its Simple.
1. Whichever company you select to work with will identify whether your business qualifies for the ERC.
2. They will assess your claim as well as calculate the optimum quantity you can get.
3. Their team overviews you with the declaring procedure, from beginning to end, consisting of appropriate documentation.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 and also right on September 30, 2021, for eligible businesses.
You can get refunds for 2020 and also 2021 after December 31st of this year, into 2022 and also 2023. And also potentially past then as well.
Many services have received reimbursements, and also others, in addition to reimbursements, likewise qualified to continue receiving ERC in every pay-roll they refine through December 31, 2021, at around 30% of their payroll cost.
Some services have gotten refunds from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, businesses can currently receive the ERC also if they currently got a PPP loan. Note, though, that the ERC will only use to incomes not used for the PPP.
Do we still certify if we did not sustain a 20% reduction in gross invoices .
A government authority called for complete or partial closure of your service throughout 2020 or 2021. This includes your procedures being limited by business, inability to travel or constraints of group conferences.
- Gross invoice reduction standards is various for 2020 as well as 2021, but is gauged against the present quarter as compared to 2019 pre-COVID quantities:
- A government authority required partial or complete closure of your service throughout 2020 or 2021. This includes your procedures being limited by business, inability to travel or constraints of team conferences.
- Gross invoice reduction requirements is different for 2020 and 2021, yet is gauged versus the existing quarter as compared to 2019 pre-COVID quantities.
Do we still certify if we stayed open throughout the pandemic?
Yes. To certify, your organization needs to meet either one of the following requirements:
- Experienced a decrease in gross receipts by 20%, or
- Had to alter service operations due to federal government orders
Numerous things are considered as modifications in business operations, including shifts in task roles and the acquisition of added safety tools.