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 big, a lot of small organization owners don't learn about this, or they've heard about it, however they do not understand much about it, even numerous tax experts don't know the ins and outs of this thing since it's brand-new and a lot of these modificationsthat are useful to business owners 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 lucrative now in 2021, more financially rewarding, far more profitable, in truth now than it was in 2020, 5x more rewarding at least. So even if you do not own an organization, make sure to share this video with company owner you understand, this video might literally be worth 10s of countless dollars for them. And if you are a company owner and after you see this video you desire to talk with me and a member of my group, who will likewise be either a CPA like myself or an EA, shoot me an email, [email protected], tell me a little about your service 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 reducing your required work 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 things your CPA must worry about, I am not going to get into the intricacies of that form here or the Form 941 and all the payroll stuff. In this video I want to tell you what you need 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?" so you can be informed and take ownership of your own tax scenarios, of your organization's tax scenario to generate more capital in your company and more wealth for yourself.
About Employee Retention 2021 Erc Calculation
Alright, now let's dig into this and let's speak about the employee retention credit or the ERC as some folks like to call it, prior to I enter into this, I want to state that nothing in this video is to be taken as legal or tax suggestions, this video is for general informative purposes just, yes, I am a tax and a certified public accountant professional, however I am not your CPA nor your tax professional unless you have engaged my firm as such. Another disclaimer here, for purposes of this video I am presuming that if you're seeing this you are a small company owner, which for employee retention credit functions implies one hundred or less employees for purposes of the 2020 credit and 5 hundred or fewer workers for functions of the 2021 credit, if you have a company with over five hundred staff members I picture you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you small service owners who might work with a regional tax expert who is so neck-deep in tax returns right now due to the fact that the federal government extended the tax deadline to May 17 or volume is simply the nature of their company 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 organization owners in 2021 and why weren't we talking about it in 2020, it's been around because then, because the CARES Act? Yes, the employee retention credit has actually been around because 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 since of the PPP, the Paycheck Protection Program.
But the stimulus costs passed in December, the Consolidated Appropriations Act, in addition to the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it much more appealing. So basically the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular lady with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for company owner in 2021. Why? Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a few reasons.
Why Employee Retention 2021 Erc Calculation
Factor, the employee retention credit for both 2020 and 2021 is now available to PPP receivers, 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 incomes. 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 however also maximize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as numerous expenses as possible that do not count for employee retention credit purposes. For example, you can't claim the employee retention credit on state joblessness insurance contributions, but state unemployment insurance coverage contributions count toward PPP forgiveness, see? You 'd desire to dispose all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much normal incomes as possible to take the employee retention credit on.
So this can get extremely technical really fast and it's really situation specific in terms of optimizing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to go into all that here, however just know that you actually need to do the mathematics when doing your PPP forgiveness to ensure you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't deduct the incomes you claimed the employee retention credit on, and that makes good sense also, why should the government give you a reduction for these salaries that they already gave you a credit for? Essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just like speaking about this things, however let's speak about another reason the employee retention credit is more attractive now than it was last year, and that is that it's much easier to certify for the employee retention credit in 2021. In 2020, for a quarter to get approved for the employee retention credit, you had to show a 50% decrease in gross receipts compared to the exact same calendar quarter in 2019.
In 2021, for a quarter to qualify for the employee retention credit, you just need to reveal a 20% decrease in gross invoices compared to the same calendar quarter in 2019. This means far more companies will qualify. My service, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
I didn't qualify for the 2020 employee retention credit first, due to the fact that I got very first round of PPP cash and second since my business didn't suffer that large 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company certifies. Also, for 2021, for any quarter, you can elect to utilize the lookback quarter, suggesting 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 purposes of figuring out 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 invoices, you will also qualify for Q2 2021 because you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so generally if you just certify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based upon the lookback. Likewise, even if you didn't have a sufficient decrease in income, you can get approved for the employee retention credit if you were needed to completely or partially suspend operations in your business 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 duration of full or partial shutdown.
Common example, you own a restaurant, and your guv signed an executive order stating that you need to close down indoor dining. That is an example of a partial shutdown. Also, not just are more businesses eligible 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 incomes and making more companies eligible through the 20% decline threshold rather than the 50% decrease threshold, but the 2021 credit is also more financially rewarding than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of qualified salaries per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per worker ... for that entire 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 wages per staff member per quarter, so we're talking about a maximum credit of $7,000 per worker 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 select the finest covered duration that will get you complete PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, however 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 easier to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, because I got very first round of PPP money and second because my service 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 qualifies. Not just are more services qualified for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the very same incomes and making more organizations eligible through the 20% decline limit rather than the 50% decrease limit, however the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified incomes per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that whole time duration?
Just How to Get going
That will negotiate on part of their customers to obtain the best costs feasible for their existing clients. They will certainly examine old billings for mistakes obtaining their customers refunds and credits.
Assistance supplied can include:
Devoted experts that will analyze very complicated program policies and also will certainly be offered to answer your questions, including:
Just how does the PPP financing element into the ERC?
What are the differences between the 2020 and also 2021 programs as well as how does it relate to your organization?
What are aggregation policies for bigger, multi-state companies, and also exactly how do I interpret several states executive orders?
Exactly how do part-time, Union, and also tipped workers influence the quantity of my refunds?
Comprehensive analysis concerning your eligibility
Thorough analysis of your case
Assistance on the declaring procedure as well as paperwork
Details program knowledge that a routine CPA or pay-roll cpu could not be well-versed in
Smooth and quick 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
Prepared To Begin? Its Simple.
1. Whichever company you pick to work with will establish whether your company certifies for the ERC.
2. They will analyze your request and calculate the maximum quantity you can receive.
3. Their team overviews you via the claiming procedure, from beginning to finish, consisting of correct paperwork.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and finishes on September 30, 2021, for qualified organizations.
You can look for refunds for 2020 and also 2021 after December 31st of this year, right into 2022 and 2023. And also possibly past after that also.
Many companies have received reimbursements, and others, along with reimbursements, additionally qualified to continue receiving ERC in every payroll they process through December 31, 2021, at around 30% of their payroll cost.
Some companies have obtained 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 currently get approved for the ERC even if they already received a PPP financing. Note, however, that the ERC will just put on earnings not used for the PPP.
sustain a 20% decline in gross billings .
A government authority required full or partial shutdown of your organization throughout 2020 or 2021. This includes your operations being limited by business, failure to travel or restrictions of team conferences.
- Gross invoice decrease criteria is different for 2020 and also 2021, yet is measured against the existing quarter as compared to 2019 pre-COVID amounts:
- A government authority needed partial or complete closure of your organization during 2020 or 2021. This includes your operations being restricted by commerce, lack of ability to take a trip or restrictions of team conferences.
- Gross receipt decrease standards is different for 2020 as well as 2021, however is gauged against the current quarter as contrasted to 2019 pre-COVID amounts.
Do we still qualify if we remained open throughout the pandemic?
Yes. To certify, your organization must satisfy either one of the complying with standards:
- Experienced a decline in gross receipts by 20%, or
- Had to alter company procedures due to government orders
Several things are taken into consideration as modifications in business operations, consisting of shifts in task duties as well as the purchase of additional protective devices.