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 Works
This is huge, a great deal of little service owners don't understand about this, or they've found out about it, but they don't understand much about it, even lots of tax experts don't know the ins and outs of this thing because it's brand-new and a lot of these changesthat are helpful to entrepreneur 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 financially rewarding now in 2021, more financially rewarding, much more lucrative, in reality now than it was in 2020, 5x more profitable at least. So even if you do not own a business, be sure to share this video with entrepreneur you know, this video might actually be worth 10s of countless dollars for them. And if you are a business owner and after you see 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 email, [email protected], tell me a little about your company and your ballpark year-over-year profits, and let's see if we can get some more money back in your pocket since you can take this credit against your payroll taxes you pay by reducing 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 things because that's the things your CPA must worry about. In this video I wish to inform 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 told me about this?" You can be notified and take ownership of your own tax situations, of your company's tax circumstance to create more money circulation in your organization and more wealth for yourself.
About Employee Retention Credit 2021
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 enter this, I desire to say that absolutely nothing in this video is to be taken as legal or tax advice, this video is for basic informative purposes just, yes, I am a CPA and a tax expert, but I am not your CPA nor your tax professional unless you have actually engaged my company as such. 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 functions means one hundred or less employees for purposes of the 2020 credit and 5 hundred or fewer employees for functions of the 2021 credit, if you have a business with over 5 hundred workers I picture you have in-house counsel, in-house CPAs who are on top of this things, however I'm here for you small company owners who may deal with a regional tax expert who is so neck-deep in income tax return right now since the government extended the tax deadline to May 17 or volume is just the nature of their organization that your tax professional hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so financially rewarding for organization owners in 2021 and why weren't we talking about it in 2020, it's been around considering that then, given that 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 because of the PPP, the Paycheck Protection Program.
Essentially the employee retention credit had a glow-up 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 appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Credit 2021
Very first reason, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, but 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 declare the employee retention credit on those salaries. The government does not look too fondly on paying your payroll for you through the PPP and after that you claiming a credit against the taxes you pay the federal government on those incomes that the federal government spent for you. That makes sense. Now, there's some preparation here. 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 very best covered period that will get you full PPP forgiveness however likewise optimize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll container with as numerous costs as possible that don't count for employee retention credit functions. For instance, you can't claim the employee retention credit on state joblessness insurance contributions, however state joblessness insurance contributions count towards PPP forgiveness, see? You 'd desire to discard all your state unemployment insurance contributions on your PPP forgiveness application to leave as much regular earnings as possible to take the employee retention credit on.
So this can get very technical extremely quickly and it's extremely circumstance specific in terms of optimizing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to go into all that here, however feel in one's bones that you truly have to do the mathematics when doing your PPP forgiveness to make certain you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't subtract the incomes you claimed the employee retention credit on, and that makes good sense also, why should the government provide you a reduction for these wages that they already gave you a credit for? Basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply like discussing this stuff, however let's speak about another reason the employee retention credit is more appealing now than it was in 2015, and that is that it's much easier to qualify for the employee retention credit in 2021. In 2020, for a quarter to receive the employee retention credit, you had to reveal a 50% decrease in gross invoices compared to the exact same calendar quarter in 2019.
However in 2021, for a quarter to qualify for the employee retention credit, you only need to show a 20% decline in gross receipts compared to the exact same calendar quarter in 2019. This means far more companies will qualify. My business, for instance, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.
I didn't qualify for the 2020 employee retention credit first, because I got first round of PPP money and second since my organization didn't suffer that big 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. Also, for 2021, for any quarter, you can elect to use the lookback quarter, suggesting that, for instance, 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 figuring out eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you receive Q1 2021 based on Q1 2021's gross invoices, you will likewise qualify for Q2 2021 because you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply qualify for Q1 and Q3 2021, you also receive Q2 and Q4 based upon the lookback. Also, even if you didn't have a sufficient decrease in revenue, you can receive the employee retention credit if you were needed to completely or partially suspend operations in your company 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 complete shutdown.
Common example, you own a dining establishment, and your guv signed an executive order mentioning that you need to close down indoor dining. That is an example of a partial shutdown. Likewise, not just are more businesses eligible for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the same incomes and making more companies eligible through the 20% decrease limit instead of the 50% decline limit, but the 2021 credit is also more 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 equivalent to 70% of qualified earnings per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... 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 wages per employee per quarter, so we're talking about an optimum credit of $7,000 per staff member 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 need to choose the best covered period that will get you complete PPP forgiveness but 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 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 initially, since I got first round of PPP cash and second due to the fact that my business 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 service certifies. Not only are more services 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 incomes and making more services eligible through the 20% decline limit rather than the 50% decline limit, however 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 equivalent to 70% of qualified earnings per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per worker ... for that whole time duration?
Exactly How to Begin
That will bargain on behalf of their clients to get the finest costs feasible for their existing clients. They will investigate old invoices for errors obtaining their clients refunds and credits.
Solutions provided can include:
Devoted specialists that will interpret extremely complex program regulations as well as will be offered to address your questions, including:
Just how does the PPP funding variable right into the ERC?
What are the differences between the 2020 as well as 2021 programs and just how does it put on your service?
What are aggregation policies for larger, multi-state companies, and also just how do I translate several states executive orders?
Just how do part-time, Union, and also tipped staff members influence the quantity of my reimbursements?
Thorough analysis regarding your eligibility
Thorough analysis of your case
Advice on the claiming procedure and also documents
Specific program expertise that a normal certified public accountant or payroll cpu may not be well-versed in
Quick and also smooth end-to-end procedure, from qualification to declaring and also obtaining refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
All Set To Start? Its Simple.
1. Whichever firm you pick to work with will figure out whether your service qualifies and gets approvel for the ERC.
2. They will certainly analyze your request as well as calculate the maximum amount you can receive.
3. Their team overviews you with the asserting procedure, from beginning to end, consisting of appropriate paperwork.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 as well as right on September 30, 2021, for qualified organizations.
You can use for reimbursements for 2020 as well as 2021 after December 31st of this year, right into 2022 and 2023. And potentially past then as well.
Many organizations have received reimbursements, and also others, along with refunds, also certified to continue receiving ERC in every payroll they refine through December 31, 2021, at around 30% of their pay-roll cost.
Some businesses have gotten reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, businesses can now get approved for the ERC even if they already got a PPP financing. Note, however, that the ERC will only put on salaries not made use of for the PPP.
Do we still accredit if we did not incur a 20% decline in gross billings .
A federal government authority called for partial or complete shutdown of your company during 2020 or 2021. This includes your procedures being limited by commerce, lack of ability to take a trip or limitations of team conferences.
- Gross invoice reduction standards is different for 2020 and 2021, yet is measured against the current quarter as compared to 2019 pre-COVID amounts:
- A government authority called for partial or full shutdown of your company throughout 2020 or 2021. This includes your operations being restricted by business, inability to travel or constraints of group meetings.
- Gross receipt reduction criteria is different for 2020 as well as 2021, yet is gauged against the present quarter as contrasted to 2019 pre-COVID amounts.
Do we still qualify if we continued to be open throughout the pandemic?
Yes. To certify, your service must fulfill either one of the adhering to criteria:
- Experienced a decrease in gross invoices by 20%, or
- Needed to alter service operations as a result of government orders
Several things are taken into consideration as changes in service procedures, consisting of shifts in task functions as well as the purchase of added protective devices.