How It Works
Even if you do not own a business, be sure to share this video with company owners you understand, this video could literally be worth 10s of thousands of dollars for them. And if you are a business owner and after you view this video you desire to talk with me and a member of my team, 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 company and your ballpark year-over-year income, 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 against your payroll taxes you pay by minimizing your needed employment tax deposits or you can ask for an advance payment of the credit utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Because that's the things your CPA should worry about, I am not going to get into the intricacies of that type here or the Form 941 and all the payroll stuff. In this video I wish 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 have not you informed me about this?" so you can be informed and take ownership of your own tax situations, of your business's tax situation to generate more capital in your organization and more wealth for yourself.
Why Employee Retention Tax Credit And Ppp
Reason, the employee retention credit for both 2020 and 2021 is now available to PPP receivers, but 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 claim the employee retention credit on those salaries. 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 finest covered period that will get you complete PPP forgiveness however also optimize your employee retention credit.
Also, for PPP forgiveness, you wish to fill up that payroll pail with as many costs as possible that don't count for employee retention credit purposes. You can't claim the employee retention credit on state joblessness insurance contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd wish to dump all your state joblessness insurance contributions on your PPP forgiveness application to leave as much common incomes as possible to take the employee retention credit on.
Another thing to note is you can't subtract the incomes you claimed the employee retention credit on, and that makes sense as well, why should the government offer you a reduction for these incomes that they currently offered you a credit for? Alright, sorry for getting a little sidetracked there, I just like talking about this stuff, however let's talk about another factor why the employee retention credit is more appealing now than it was last year, and that is that it's much easier to certify for the employee retention credit in 2021.
In 2021, for a quarter to qualify for the employee retention credit, you only require to reveal a 20% reduction in gross receipts compared to the exact same calendar quarter in 2019. So this indicates far more companies will certify. My organization, 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 get approved for the 2020 employee retention credit initially, due to the fact that I got preliminary of PPP money and second because my company didn't suffer that big 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, implying 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 identifying eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Ramification here is that if you qualify for Q1 2021 based on Q1 2021's gross receipts, you will also 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 generally if you simply get approved for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Even if you didn't have an enough decrease in income, you can certify for the employee retention credit if you were needed to totally 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 throughout that period of full or partial shutdown.
Typical example, you own a restaurant, and your guv signed an executive order mentioning that you require to shut down indoor dining. That is an example of a partial shutdown. Not only 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 same earnings and making more companies eligible through the 20% decrease limit rather than the 50% decline limit, however the 2021 credit is also more financially rewarding than the 2020 credit.
This is because for 2020, the employee retention credit amounted to 50% of all qualified incomes for 2020, the employee retention credit was equivalent to 50% of all qualified wages you paid employees in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in incomes for that whole time duration. The optimum 2020 credit per employee was $5,000. Okay, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit amounts to 70% of qualified earnings per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per employee ... for that whole period? No. Per quarter. For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in salaries per employee per quarter, so we're talking about a maximum credit of $7,000 per staff member per quarter. $7,000 times four is $28,000 if you're qualified all 4 quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker. That's big. That's a godsend to numerous company owner right now. So you see what I imply now, right, how the employee retention credit has gone from awful duckling in 2020 to lovely swan in 2021, right? And by the way, by the way, qualified incomes includes employer-paid health insurance coverage 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 select the finest covered duration that will get you full PPP forgiveness however likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply like 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 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 very first round of PPP money and 2nd because my service didn't suffer that big 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company certifies. Not just 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 same salaries and making more organizations eligible through the 20% decline limit rather than the 50% decrease threshold, but the 2021 credit is also more financially rewarding 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 salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that whole time period?
Just How to Get going
The best method is to function with a no-risk, contingency-based expense financial savings business. That will certainly bargain on behalf of their clients to obtain the ideal rates feasible for their existing customers. They will investigate old billings for mistakes getting their customers refunds as well as credits. They can boost the success and total appraisal of their customers organizations.
Solutions offered can include:
Devoted specialists that will certainly analyze extremely complicated program policies as well as will certainly be available to answer your inquiries, including:
Just how does the PPP lending aspect into the ERC?
What are the distinctions between the 2020 as well as 2021 programs and just how does it use to your organization?
What are gathering guidelines for bigger, multi-state employers, and also exactly how do I translate numerous states executive orders?
Just how do part-time, Union, and also tipped employees impact the quantity of my reimbursements?
Comprehensive analysis concerning your eligibility
Comprehensive evaluation of your situation
Assistance on the claiming procedure and paperwork
Certain program knowledge that a regular certified public accountant or pay-roll cpu could not be well-versed in
Quick and smooth end-to-end process, from qualification to claiming and also getting reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Start? Its Simple.
1. Whichever firm you select to work with will certainly establish whether your business qualifies and gets approvel for the ERC.
2. They will certainly assess your request as well as compute the optimum amount you can receive.
3. Their team guides you via the asserting process, from beginning to finish, including proper paperwork.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 and also right on September 30, 2021, for eligible companies.
You can use for refunds for 2020 and 2021 after December 31st of this year, right into 2022 and also 2023. As well as possibly beyond after that also.
Many businesses have received reimbursements, as well as others, along with reimbursements, additionally certified to proceed getting ERC in every payroll they process to December 31, 2021, at close to 30% of their payroll cost.
Some services have actually received refunds from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can currently get approved for the ERC also if they already got a PPP finance. Note, though, that the ERC will just relate to incomes not made use of for the PPP.
sustain a 20% decline in gross invoices .
A government authority required complete or partial shutdown of your organization during 2020 or 2021. This includes your operations being restricted by business, lack of ability to travel or limitations of team conferences.
- Gross invoice decrease criteria is various for 2020 and also 2021, yet is determined versus the existing quarter as contrasted to 2019 pre-COVID amounts:
- A federal government authority called for partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by business, inability to travel or restrictions of team meetings.
- Gross invoice reduction criteria is various for 2020 as well as 2021, yet is gauged versus the present quarter as compared to 2019 pre-COVID amounts.
Do we still certify if we remained open during the pandemic?
Yes. To qualify, your company should satisfy either one of the adhering to requirements:
- Experienced a decline in gross receipts by 20%, or
- Had to change service procedures because of government orders
Many items are taken into consideration as adjustments in company operations, consisting of changes in job roles and the acquisition of extra safety tools.