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 Functions
Even if you do not own a business, be sure to share this video with service owners you know, this video could literally be worth 10s of thousands of dollars for them. And if you are an organization owner and after you enjoy this video you want to talk with me and a member of my team, who will also be either a CPA like myself or an EA, shoot me an e-mail, [email protected], tell me a little about your business and your ballpark year-over-year profits, 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 minimizing your needed employment 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 should stress about, I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll things. In this video I want 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 told me about this?" You can be informed and take ownership of your own tax scenarios, of your organization's tax circumstance to create more money flow in your service and more wealth for yourself.
About Employee Retention 2021 Ertc Qualifications
Alright, now let's dig into this and let's talk about the employee retention credit or the ERC as some folks like to call it, before I get into this, I want to state that absolutely nothing in this video is to be taken as legal or tax recommendations, this video is for basic educational purposes only, yes, I am a tax and a cpa expert, however I am not your CPA nor your tax expert unless you have engaged my company. Another disclaimer here, for purposes of this video I am assuming that if you're seeing this you are a small organization owner, which for employee retention credit purposes suggests one hundred or less workers for functions of the 2020 credit and five hundred or less workers 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, but 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 today because the government extended the tax due date to May 17 or volume is simply the nature of their company that your tax expert hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so financially rewarding for business owners in 2021 and why weren't we talking about it in 2020, it's been around considering that then, because the CARES Act? Yes, the employee retention credit has been around given that 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 due to the fact that of the PPP, the Paycheck Protection Program.
But the stimulus expense passed in December, the Consolidated Appropriations Act, along with the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more attractive. So basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular lady with unkempt 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 appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll tell you why, a few reasons.
Why Employee Retention 2021 Ertc Qualifications
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 declare the employee retention credit on those salaries. 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 best covered period that will get you full PPP forgiveness but likewise optimize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as lots of costs as possible that don't count for employee retention credit purposes. You can't claim the employee retention credit on state unemployment insurance contributions, however state unemployment insurance coverage contributions count towards PPP forgiveness, see? You 'd desire to discard all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much ordinary earnings as possible to take the employee retention credit on.
Another thing to note is you can't deduct the incomes you declared the employee retention credit on, and that makes sense as well, why should the government give you a reduction for these salaries that they currently provided you a credit for? Alright, sorry for getting a little sidetracked there, I just like 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.
However in 2021, for a quarter to receive the employee retention credit, you just require to show a 20% reduction in gross invoices compared to the exact same calendar quarter in 2019. So this indicates far more businesses will qualify. My business, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
I didn't qualify for the 2020 employee retention credit first, because I got very first round of PPP cash and second because my business didn't suffer that big 50% decrease needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization qualifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, meaning that, for example, even if your Q1 2021 gross receipts 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 receive Q1 2021 based upon Q1 2021's gross receipts, you will likewise qualify for Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Exact 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. Even if you didn't have an enough decline in earnings, you can qualify for the employee retention credit if you were needed to fully 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 partial or full shutdown.
Common example, you own a restaurant, and your governor signed an executive order stating that you need to shut down indoor dining. That is an example of a partial shutdown. Not only are more services eligible 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 services eligible through the 20% decrease threshold rather than the 50% decline limit, however the 2021 credit is also more rewarding than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified wages per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that whole 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 incomes 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 require to pick the best covered period that will get you complete PPP forgiveness however likewise maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, 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. I didn't qualify for the 2020 employee retention credit first, because I got first round of PPP cash and second because my company 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 organization certifies. Not only are more organizations eligible for the employee retention credit thanks to these brand-new laws, making PPP recipients eligible for the employee retention credit though not on the exact same salaries and making more organizations eligible through the 20% decrease threshold rather than the 50% decrease limit, however the 2021 credit is also more financially rewarding than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of certified incomes per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that entire time duration?
Exactly How to Begin
The most effective way is to deal with a no-risk, contingency-based expense savings firm. That will bargain in support of their clients to obtain the best prices possible for their existing clients. They will audit old billings for errors getting their clients reimbursements and tax credits. They can boost the success and also total appraisal of their customers organizations.
Services supplied can include:
Dedicated professionals that will certainly translate very intricate program policies and also will be offered to answer your questions, including:
How does the PPP lending element into the ERC?
What are the differences between the 2020 and 2021 programs and exactly how does it use to your organization?
What are aggregation regulations for bigger, multi-state companies, and how do I analyze numerous states executive orders?
Exactly how do part-time, Union, and tipped employees impact the quantity of my refunds?
Detailed analysis concerning your qualification
Comprehensive analysis of your case
Guidance on the asserting procedure and also documents
Details program expertise that a normal certified public accountant or pay-roll processor could not be well-versed in
Smooth as well as fast end-to-end process, from eligibility to claiming and getting reimbursements
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All Set To Get Started? Its Simple.
1. Whichever company you pick to work with will certainly establish whether your organization certifies and gets approvel for the ERC.
2. They will examine your claim and compute the optimum quantity you can obtain.
3. Their team guides you through the asserting procedure, from starting to finish, including correct documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 as well as right on September 30, 2021, for qualified companies.
You can make an application for refunds for 2020 as well as 2021 after December 31st of this year, into 2022 and also 2023. As well as possibly past then as well.
Many companies have received reimbursements, and others, in enhancement to refunds, also certified to continue getting ERC in every payroll they refine to December 31, 2021, at about 30% of their payroll cost.
Some companies have actually received refunds from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now qualify for the ERC also if they already got a PPP lending. Keep in mind, though, that the ERC will only put on salaries not made use of for the PPP.
Do we still qualify if we did not) sustain a 20% decrease in gross billings .
A federal government authority needed complete or partial shutdown of your service during 2020 or 2021. This includes your procedures being restricted by business, inability to travel or limitations of group conferences.
- Gross invoice reduction criteria is different for 2020 and also 2021, however is gauged versus the current quarter as compared to 2019 pre-COVID amounts:
- A federal government authority called for full or partial closure of your service during 2020 or 2021. This includes your operations being restricted by commerce, lack of ability to travel or restrictions of team conferences.
- Gross invoice reduction criteria is different for 2020 and also 2021, however is measured against the present quarter as compared to 2019 pre-COVID quantities.
Do we still qualify if we remained open throughout the pandemic?
Yes. To certify, your service has to fulfill either one of the complying with requirements:
- Experienced a decline in gross receipts by 20%, or
- Needed to change company procedures because of government orders
Many things are taken into consideration as modifications in organization procedures, including shifts in work functions and the purchase of added protective devices.