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.
Exactly How It Works
This is huge, a lot of small company owners do not understand about this, or they've become aware of it, however they do not know much about it, even many tax specialists do not know the ins and outs of this thing due to the fact that it's new and a great deal of these changesthat are helpful to company owner occurred in the middle of tax season. So in this video I'm going to go into the employee retention credit, why it's so lucrative now in 2021, more financially rewarding, much more financially rewarding, in truth now than it was in 2020, 5x more lucrative a minimum of. So even if you don't own a service, be sure to share this video with entrepreneur you know, this video could actually deserve tens of countless dollars for them. And if you are an entrepreneur and after you watch this video you desire 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 email, [email protected], inform me a little about your company and your ballpark year-over-year revenue, and let's see if we can get some more refund in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by lowering your required employment tax deposits or you can ask for 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 kind here or the Form 941 and all the payroll stuff because that's the things your CPA need to fret about. In this video I desire to inform you what you require 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 situations, of your organization's tax situation to create more capital in your company and more wealth on your own.
About Employee Retention 2021 Erc Calculation
Alright, now let's dig into this and let's discuss the employee retention credit or the ERC as some folks like to call it, prior to I get into this, I wish to say that absolutely nothing in this video is to be taken as legal or tax advice, this video is for basic informational functions only, yes, I am a CPA and a tax professional, but I am not your CPA nor your tax expert unless you have actually engaged my company as such. Another disclaimer here, for functions of this video I am assuming that if you're seeing this you are a small company owner, which for employee retention credit functions implies one hundred or fewer staff members for purposes of the 2020 credit and 5 hundred or less staff members for purposes of the 2021 credit, if you have a business with over 5 hundred employees I envision you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you little service owners who may deal with a local tax expert who is so neck-deep in tax returns today because the federal government extended the tax due date to May 17 or volume is simply the nature of their organization 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 lucrative for service owners in 2021 and why weren't we talking about it in 2020, it's been around considering that then, since the CARES Act? Yes, the employee retention credit has 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 because of the PPP, the Paycheck Protection Program.
Generally the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular woman with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for business owners in 2021. Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention 2021 Erc Calculation
Very first reason, the employee retention credit for both 2020 and 2021 is now available to PPP recipients, however naturally 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 incomes. The government doesn't look too fondly on paying your payroll for you through the PPP and after that you declaring a credit against the taxes you pay the government on those wages that the government paid for you. That makes sense. Now, there's some planning here. 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 full PPP forgiveness but also optimize your employee retention credit.
Likewise, for PPP forgiveness, you desire to fill up that payroll pail with as numerous expenses as possible that do not count for employee retention credit functions. For instance, you can't claim the employee retention credit on state joblessness insurance coverage contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? You 'd desire to discard all your state unemployment 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 offer you a deduction for these salaries that they currently provided you a credit for? Alright, sorry for getting a little sidetracked there, I simply like talking about this things, but 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 qualify for the employee retention credit in 2021.
However in 2021, for a quarter to receive the employee retention credit, you just need to show a 20% reduction in gross invoices compared to the same calendar quarter in 2019. This indicates far more organizations will certify. 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.
So I didn't get approved for the 2020 employee retention credit first, due to the fact that I got preliminary of PPP cash and second since my organization didn't suffer that large 50% decline needed to receive the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Likewise, for 2021, for any quarter, you can elect to utilize the lookback quarter, meaning that, for instance, even if your Q1 2021 gross invoices aren't a minimum of 20% lower than your Q1 2019 gross receipts, you can compare for purposes 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 get approved for Q1 2021 based on Q1 2021's gross receipts, you will also receive Q2 2021 considering that you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just qualify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Even if you didn't have a sufficient decline in revenue, you can qualify for the employee retention credit if you were required to completely or partially suspend operations in your business during any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are eligible for the employee retention credit during that duration of partial or full shutdown.
Common example, you own a dining establishment, and your guv signed an executive order specifying that you need to shut 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 recipients qualified for the employee retention credit though not on the same earnings and making more companies eligible through the 20% decrease threshold instead of the 50% decrease threshold, but the 2021 credit is likewise more financially rewarding than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified wages per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per worker ... for that whole time duration? 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 worker per quarter, so we're talking about an optimum credit of $7,000 per employee per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per staff member.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to choose the best covered duration that will get you full PPP forgiveness however also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just love talking about this stuff, 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 easier to certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit first, since I got very first round of PPP cash 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 business qualifies. Not just are more services qualified for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the same salaries and making more services eligible through the 20% decrease limit rather than the 50% decline limit, however the 2021 credit is likewise more rewarding than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified salaries per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that whole time period?
Exactly How to Begin
That will certainly work out on part of their customers to get the best costs feasible for their existing customers. They will certainly investigate old billings for errors obtaining their customers reimbursements as well as credits.
Assistance provided can include:
Devoted specialists that will certainly interpret very complex program rules as well as will certainly be offered to answer your questions, including:
Just how does the PPP loan factor into the ERC?
What are the distinctions in between the 2020 as well as 2021 programs and also just how does it relate to your organization?
What are gathering guidelines for bigger, multi-state companies, as well as just how do I analyze multiple states executive orders?
Exactly how do part-time, Union, and tipped staff members affect the amount of my refunds?
Comprehensive analysis regarding your qualification
Extensive evaluation of your case
Assistance on the declaring process and documentation
Specific program experience that a regular certified public accountant or pay-roll cpu might not be well-versed in
Quick as well as smooth end-to-end procedure, from eligibility to asserting and getting refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Begin? Its Simple.
1. Whichever firm you select to work with will determine whether your organization qualifies for the ERC.
2. They will certainly evaluate your request and also calculate the maximum amount you can receive.
3. Their team guides you via the declaring process, from beginning to finish, including appropriate documentation.
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 employers.
You can use for refunds for 2020 and also 2021 after December 31st of this year, into 2022 as well as 2023. And potentially beyond after that too.
Many services have received reimbursements, and others, along with refunds, additionally certified to proceed getting ERC in every payroll they refine through December 31, 2021, at about 30% of their payroll expense.
Some companies have gotten reimbursements from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can currently get the ERC also if they currently got a PPP funding. Note, though, that the ERC will only put on salaries not utilized for the PPP.
Do we still accredit if we did not) sustain a 20% decrease in gross invoices .
A federal government authority needed full or partial closure of your organization during 2020 or 2021. This includes your procedures being limited by business, failure to travel or constraints of group conferences.
- Gross receipt decrease requirements is various for 2020 as well as 2021, yet is determined versus the current quarter as compared to 2019 pre-COVID amounts:
- A federal government authority called for partial or full shutdown of your organization throughout 2020 or 2021. This includes your procedures being limited by commerce, lack of ability to take a trip or restrictions of team meetings.
- Gross invoice reduction standards is various for 2020 and also 2021, however is determined against the current quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we stayed open throughout the pandemic?
Yes. To certify, your business needs to meet either among the complying with standards:
- Experienced a decrease in gross receipts by 20%, or
- Needed to alter service operations due to government orders
Numerous things are taken into consideration as modifications in organization operations, consisting of changes in job duties and the acquisition of extra protective equipment.