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
Even if you don't own an organization, be sure to share this video with organization owners you understand, this video might literally be worth 10s of thousands of dollars for them. And if you are a company owner and after you see this video you want 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 e-mail, [email protected], inform me a little about your business and your ballpark year-over-year income, and let's see if we can get some more cash back in your pocket because you can take this credit against your payroll taxes you pay by minimizing your required work tax deposits or you can request an advance payment of the credit using IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
I am not going to get into the complexities of that type here or the Form 941 and all the payroll things because that's the things your CPA must stress about. In this video I desire to inform you what you need to know so you can go to your CPA and say, "Hey, what about this employee retention credit, why have not you informed me about this?" so you can be notified and take ownership of your own tax circumstances, of your business's tax situation to generate more capital in your business and more wealth for yourself.
About Employee Retention Tax Credit Reinstatement Act
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, prior to I enter this, I desire to state that absolutely nothing in this video is to be taken as legal or tax advice, this video is for basic informational functions just, yes, I am a tax and a certified public accountant professional, however I am not your CPA nor your tax expert unless you have engaged my firm as such. Another disclaimer here, for functions of this video I am assuming that if you're enjoying this you are a small company owner, which for employee retention credit purposes means one hundred or less employees for purposes of the 2020 credit and 5 hundred or less workers for functions of the 2021 credit, if you have a business with over 5 hundred staff members I picture 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 might work with a local tax expert who is so neck-deep in income tax return right now because the federal government extended the tax due date to May 17 or volume is simply the nature of their business that your tax expert hasn't had the time to go into the weeds here like I have.
So employee retention credit, why is it so profitable for organization owners in 2021 and why weren't we discussing it in 2020, it's been around because 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 since 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 because of the PPP, the Paycheck Protection Program. Initially, in 2020, if you received a PPP loan as an employer, you were not qualified for the employee retention credit.
But the stimulus expense passed in December, the Consolidated Appropriations Act, in addition to the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more appealing. So generally the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular woman with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for organization owners 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 tell you why, a few reasons.
Why Employee Retention Tax Credit Reinstatement Act
Factor, the employee retention credit for both 2020 and 2021 is now readily 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 earnings. If you got PPP and you are qualified 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 but also optimize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll container with as lots of costs as possible that don't count for employee retention credit functions. You can't claim the employee retention credit on state joblessness insurance coverage contributions, however state unemployment insurance coverage contributions count toward PPP forgiveness, see? You 'd desire to discard 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.
Another thing to note is you can't subtract the earnings you claimed the employee retention credit on, and that makes sense as well, why should the federal government provide you a reduction for these incomes that they currently gave you a credit for? Alright, sorry for getting a little sidetracked there, I simply 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 qualify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you only require to reveal a 20% decrease in gross invoices compared to the same calendar quarter in 2019. This implies far more companies will certify. My business, for example, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
So I didn't receive the 2020 employee retention credit initially, due to the fact that I got preliminary of PPP money and 2nd since my organization didn't suffer that large 50% decrease needed to receive 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, meaning 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 determining eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you certify for Q1 2021 based upon Q1 2021's gross receipts, you will likewise receive 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 just receive Q1 and Q3 2021, you also receive Q2 and Q4 based upon the lookback. Even if you didn't have an enough decrease in revenue, you can qualify for the employee retention credit if you were required to completely or partially suspend operations in your organization 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 complete or partial shutdown.
Typical example, you own a restaurant, and your governor signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Not only are more businesses qualified for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the exact same earnings and making more businesses eligible through the 20% decline limit rather than the 50% decline threshold, but the 2021 credit is also more lucrative than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of certified incomes per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that entire time period? For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in earnings per employee per quarter, so we're talking about a maximum credit of $7,000 per staff member per quarter. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you need to pick the finest covered duration that will get you full PPP forgiveness however likewise maximize 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 factor why the employee retention credit is more attractive 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 initially, since I got very first round of PPP cash and second because my business 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 business certifies. Not only are more companies 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 very same salaries and making more services eligible through the 20% decrease 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 because for 2021, the credit is equivalent to 70% of certified wages per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that whole time period?
Just How to Start
That will certainly bargain on behalf of their customers to obtain the best rates feasible for their existing clients. They will certainly investigate old invoices for mistakes getting their customers refunds as well as tax credits.
Assistance offered can include:
Dedicated specialists that will certainly analyze extremely complicated program rules and also will certainly be readily available to answer your concerns, including:
Exactly how does the PPP lending element right into the ERC?
What are the differences between the 2020 as well as 2021 programs and also how does it put on your business?
What are gathering rules for bigger, multi-state employers, as well as how do I analyze numerous states executive orders?
How do part-time, Union, as well as tipped employees impact the amount of my refunds?
Comprehensive analysis regarding your eligibility
Detailed evaluation of your claim
Support on the claiming procedure and documentation
Specific program proficiency that a routine certified public accountant or payroll processor might not be well-versed in
Smooth and rapid end-to-end process, from eligibility to claiming and also receiving reimbursements
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Begin? Its Simple.
1. Whichever firm you pick to work with will certainly identify whether your service qualifies and gets approvel for the ERC.
2. They will examine your claim and compute the maximum amount you can receive.
3. Their team guides you via the declaring process, from starting to end, consisting of appropriate paperwork.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 and ends on September 30, 2021, for qualified businesses.
You can request reimbursements for 2020 and also 2021 after December 31st of this year, into 2022 as well as 2023. And possibly beyond then as well.
Many organizations have received reimbursements, and also others, along with reimbursements, also certified to continue getting ERC in every payroll they refine through December 31, 2021, at about 30% of their pay-roll expense.
Some organizations have actually gotten reimbursements from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can currently receive the ERC even if they already received a PPP loan. Keep in mind, though, that the ERC will only relate to incomes not used for the PPP.
sustain a 20% decrease in gross receipts .
A government authority called for partial or full closure of your organization during 2020 or 2021. This includes your procedures being restricted by commerce, inability to travel or constraints of team meetings.
- Gross invoice reduction requirements is different for 2020 as well as 2021, but is gauged versus the present quarter as compared to 2019 pre-COVID amounts:
- A federal government authority called for full or partial closure of your organization during 2020 or 2021. This includes your operations being restricted by commerce, lack of ability to travel or restrictions of team conferences.
- Gross invoice decrease requirements is various for 2020 and also 2021, however is determined against the current quarter as compared to 2019 pre-COVID amounts.
Do we still qualify if we stayed open during the pandemic?
Yes. To certify, your company must fulfill either one of the complying with standards:
- Experienced a decline in gross receipts by 20%, or
- Needed to transform organization operations due to federal government orders
Numerous products are taken into consideration as changes in organization operations, including changes in job roles and also the acquisition of extra safety tools.