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?