How It Works
Even if you don't own a company, be sure to share this video with organization owners you understand, this video could literally be worth 10s of thousands of dollars for them. And if you are a company owner and after you enjoy 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 organization 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 versus 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.
I am not going to get into the complexities of that type here or the Form 941 and all the payroll stuff since that's the things your CPA must worry about. In this video I wish to tell you what you need to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why have not you informed me about this?" You can be informed and take ownership of your own tax situations, of your business's tax circumstance to generate more cash flow in your business and more wealth for yourself.
Why Employee Retention Program
Reason, 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 workers and then turn around and claim the employee retention credit on those wages. If you got PPP and you are qualified 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 complete PPP forgiveness but also maximize your employee retention credit.
Also, 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 contributions, but state joblessness insurance contributions count towards PPP forgiveness, see? You 'd want 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.
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 give you a deduction for these earnings that they already offered you a credit for? Alright, sorry for getting a little sidetracked there, I just enjoy talking about this things, 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 much easier to certify for the employee retention credit in 2021.
However in 2021, for a quarter to certify for the employee retention credit, you just need to show a 20% decline in gross invoices compared to the exact same calendar quarter in 2019. This indicates far more companies will qualify. My service, 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, due to the fact that I got first round of PPP money and 2nd due to the fact that my organization 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 business certifies. Also, for 2021, for any quarter, you can elect to utilize the lookback quarter, indicating that, for instance, even if your Q1 2021 gross receipts aren't a minimum of 20% lower than your Q1 2019 gross invoices, you can compare for purposes of identifying 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 upon Q1 2021's gross receipts, you will likewise receive Q2 2021 given that you certified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just receive Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based upon the lookback. Also, even if you didn't have a sufficient decline in revenue, you can qualify for the employee retention credit if you were required to fully 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 throughout that duration of partial or complete shutdown.
Typical example, you own a restaurant, and your guv signed an executive order stating that you require to shut down indoor dining. That is an example of a partial shutdown. Likewise, not just are more businesses qualified 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 services eligible through the 20% decline threshold instead of the 50% decline limit, but the 2021 credit is likewise more lucrative than the 2020 credit.
This is since for 2020, the employee retention credit was equivalent to 50% of all qualified incomes for 2020, the employee retention credit was equivalent to 50% of all qualified incomes you paid staff members in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in earnings for that whole time duration. The optimum 2020 credit per staff member was $5,000. Okay, but that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified earnings per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that entire time duration? No. Per quarter. 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 employee per quarter, so we're talking about an optimum credit of $7,000 per worker per quarter. $7,000 times 4 is $28,000 if you're qualified all four quarters. That's right, folks, the optimum 2021 employee retention credit is $28,000 per worker. That's big. That's a godsend to lots of company owner right now. You see what I imply now, right, how the employee retention credit has gone from unsightly duckling in 2020 to stunning swan in 2021? And by the way, by the method, certified incomes consists of employer-paid medical insurance premiums.
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 period that will get you full PPP forgiveness however likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just love 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 certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, due to the fact that I got first round of PPP money and second because my service didn't suffer that big 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Not just are more services qualified 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 businesses eligible through the 20% decline threshold rather than the 50% decrease limit, but the 2021 credit is likewise more lucrative than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of certified wages per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per employee ... for that whole time period?
How to Get going
That will work out on behalf of their clients to obtain the finest costs possible for their existing clients. They will audit old invoices for errors obtaining their clients reimbursements and credits.
Services offered can include:
Devoted experts that will translate very complex program regulations and also will certainly be readily available to answer your questions, including:
Just how does the PPP lending factor into the ERC?
What are the distinctions between the 2020 and also 2021 programs as well as just how does it apply to your organization?
What are aggregation policies for larger, multi-state companies, as well as how do I translate multiple states executive orders?
How do part-time, Union, as well as tipped workers impact the quantity of my reimbursements?
Detailed analysis concerning your qualification
Comprehensive evaluation of your case
Support on the asserting procedure and documentation
Certain program expertise that a routine certified public accountant or payroll cpu might not be well-versed in
Smooth and also fast end-to-end procedure, from eligibility to asserting and also getting refunds
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Ready To Start? Its Simple.
1. Whichever company you select to work with will figure out whether your organization certifies and gets approvel for the ERC.
2. They will evaluate your claim and also compute the optimum amount you can receive.
3. Their group overviews you with the claiming procedure, from starting to finish, including proper 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 qualified employers.
You can get reimbursements for 2020 as well as 2021 after December 31st of this year, right into 2022 and also 2023. As well as potentially past after that also.
Many services have received reimbursements, as well as others, in addition to refunds, likewise qualified to continue receiving ERC in every pay-roll they process to December 31, 2021, at about 30% of their payroll expense.
Some services have obtained reimbursements from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can now get approved for the ERC even if they currently got a PPP finance. Note, however, that the ERC will just relate to incomes not utilized for the PPP.
maintain a 20% decrease in gross billings .
A federal government authority needed full or partial shutdown of your company throughout 2020 or 2021. This includes your procedures being limited by commerce, failure to take a trip or limitations of team meetings.
- Gross receipt decrease criteria is different for 2020 and also 2021, yet is determined against the existing quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority needed partial or complete shutdown of your business during 2020 or 2021. This includes your operations being restricted by business, failure to travel or restrictions of group meetings.
- Gross invoice reduction criteria is different for 2020 and 2021, but is measured versus the existing quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we remained open during the pandemic?
Yes. To qualify, your business should meet either among the adhering to standards:
- Experienced a decline in gross receipts by 20%, or
- Needed to change company procedures as a result of government orders
Many products are considered as modifications in service operations, consisting of shifts in job functions as well as the acquisition of additional safety equipment.