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.
Just how It Works
Even if you don't own a service, be sure to share this video with business owners you know, this video might actually be worth tens of thousands of dollars for them. And if you are a service owner and after you view 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 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 against your payroll taxes you pay by decreasing your needed work 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 type here or the Form 941 and all the payroll things because that's the stuff your CPA ought to stress over. In this video I want 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 scenarios, of your service's tax situation to generate more capital in your organization and more wealth for yourself.
About Employee Retention Credit Irs
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 nothing in this video is to be taken as legal or tax guidance, this video is for basic informational purposes only, yes, I am a CPA and a tax expert, but I am not your CPA nor your tax expert unless you have actually engaged my company. Another disclaimer here, for functions of this video I am assuming that if you're viewing this you are a small company owner, which for employee retention credit purposes indicates one hundred or less employees for purposes of the 2020 credit and 5 hundred or fewer workers for purposes of the 2021 credit, if you have a business with over 5 hundred staff members I picture you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you small organization owners who might work with a local tax professional who is so neck-deep in tax returns today because the government extended the tax due date to May 17 or volume is simply the nature of their service that your tax expert hasn't had the time to go into the weeds here like I have.
So employee retention credit, why is it so profitable for entrepreneur in 2021 and why weren't we discussing it in 2020, it's been around since then, considering that the CARES Act? Why is it getting all this buzz now that it wasn't last year? Well, let's back it up. 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 in 2015 in 2020 because of the PPP, the Paycheck Protection Program. Initially, in 2020, if you got a PPP loan as a company, you were not qualified for the employee retention credit.
However the stimulus costs 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 a lot more appealing. Basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular girl with unkempt eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for business owners 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 couple of reasons.
Why Employee Retention Credit Irs
Factor, the employee retention credit for both 2020 and 2021 is now offered to PPP recipients, however 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 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 require to choose the finest covered duration that will get you full PPP forgiveness however likewise maximize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as lots of expenses as possible that do not count for employee retention credit purposes. You can't declare the employee retention credit on state joblessness insurance coverage contributions, but state joblessness insurance contributions count toward PPP forgiveness, see? You 'd desire to dump all your state unemployment 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 gave 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 simpler to qualify for the employee retention credit in 2021.
But in 2021, for a quarter to get approved for the employee retention credit, you only require to reveal a 20% reduction in gross invoices compared to the exact same calendar quarter in 2019. So this suggests even more companies will qualify. My company, 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 cash and second due to the fact that my service didn't suffer that big 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. For 2021, for any quarter, you can choose to use the lookback quarter, indicating that, for example, even if your Q1 2021 gross invoices aren't at least 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 qualify for Q1 2021 based on Q1 2021's gross invoices, you will likewise get approved for Q2 2021 since you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so generally if you just qualify for Q1 and Q3 2021, you likewise certify for Q2 and Q4 based upon the lookback. Likewise, even if you didn't have an adequate decrease in earnings, you can receive the employee retention credit if you were needed to fully 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 eligible for the employee retention credit during that duration of full or partial shutdown.
Common example, you own a dining establishment, and your governor signed an executive order stating that you need to close down indoor dining. That is an example of a partial shutdown. Not just are more organizations eligible for the employee retention credit thanks to these brand-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% decrease threshold, however the 2021 credit is likewise more lucrative than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit was equal to 50% of all certified earnings for 2020, the employee retention credit was equal to 50% of all certified earnings you paid staff members in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in salaries for that whole time duration. The maximum 2020 credit per staff member was $5,000. Not bad, but that's absolutely nothing compared to the 2021 credit because for 2021, the credit amounts to 70% of qualified incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per employee ... for that entire time duration? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in earnings per staff member per quarter, so we're discussing an optimum credit of $7,000 per employee per quarter. If you're eligible all four quarters, $7,000 times four is $28,000. That's right, folks, the optimum 2021 employee retention credit is $28,000 per staff member. That's huge. That's a blessing to numerous company owner right now. So you see what I suggest now, right, how the employee retention credit has gone from ugly duckling in 2020 to lovely swan in 2021, right? And by the way, by the way, qualified earnings consists of employer-paid medical insurance premiums.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to select the finest covered period that will get you full PPP forgiveness but likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just love talking about this stuff, 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 much easier to qualify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, due to the fact that I got first round of PPP money and second due to the fact that my service 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 company qualifies. Not just are more organizations 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 very same incomes and making more services eligible through the 20% decrease threshold rather than the 50% decline limit, but the 2021 credit is likewise more profitable 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 equal to 70% of certified wages per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per employee ... for that entire time period?
Exactly How to Get going
That will discuss on behalf of their clients to obtain the finest prices possible for their existing clients. They will certainly audit old invoices for errors obtaining their customers reimbursements and also tax credits.
Services supplied can include:
Devoted specialists that will interpret highly complex program policies and will certainly be readily available to answer your questions, including:
How does the PPP lending variable right into the ERC?
What are the distinctions in between the 2020 and also 2021 programs and also how does it relate to your business?
What are gathering policies for bigger, multi-state companies, and exactly how do I translate several states executive orders?
How do part-time, Union, as well as tipped staff members impact the amount of my refunds?
Complete analysis concerning your eligibility
Detailed analysis of your claim
Support on the declaring process as well as documentation
Details program proficiency that a normal certified public accountant or payroll cpu could not be well-versed in
Smooth and also quick end-to-end process, from eligibility to declaring as well as obtaining refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Begin? Its Simple.
1. Whichever business you pick to work with will determine whether your service qualifies and gets approvel for the ERC.
2. They will certainly assess your case as well as compute the optimum amount you can get.
3. Their team overviews you through the claiming 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 and also right on September 30, 2021, for qualified organizations.
You can request refunds for 2020 as well as 2021 after December 31st of this year, into 2022 as well as 2023. As well as possibly beyond after that also.
Many services have received refunds, and also others, along with refunds, also qualified to proceed getting ERC in every pay-roll they refine through December 31, 2021, at about 30% of their pay-roll expense.
Some companies have actually gotten refunds from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now receive the ERC also if they already received a PPP lending. Keep in mind, however, that the ERC will just relate to salaries not used for the PPP.
maintain a 20% decrease in gross invoices .
A government authority called for partial or full shutdown of your company throughout 2020 or 2021. This includes your operations being restricted by business, lack of ability to take a trip or limitations of team conferences.
- Gross receipt decrease criteria is various for 2020 and 2021, however is gauged versus the present quarter as compared to 2019 pre-COVID quantities:
- A government authority required partial or full shutdown of your service during 2020 or 2021. This includes your procedures being limited by business, lack of ability to take a trip or restrictions of team meetings.
- Gross invoice decrease requirements is different for 2020 as well as 2021, however is gauged against the existing quarter as contrasted to 2019 pre-COVID amounts.
Do we still certify if we stayed open during the pandemic?
Yes. To certify, your business should fulfill either one of the adhering to requirements:
- Experienced a decrease in gross receipts by 20%, or
- Needed to alter organization operations as a result of federal government orders
Several things are thought about as changes in service operations, including changes in task duties and also the acquisition of extra safety devices.