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 Functions
Even if you do not own an organization, be sure to share this video with service owners you know, this video might literally be worth tens of thousands of dollars for them. And if you are a company owner and after you watch this video you desire to talk with me and a member of my group, who will likewise be either a CPA like myself or an EA, shoot me an email, [email protected], tell me a little about your organization and your ballpark year-over-year revenue, and let's see if we can get some more cash back in your pocket since you can take this credit versus your payroll taxes you pay by lowering your needed work tax deposits or you can request 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 intricacies of that kind here or the Form 941 and all the payroll things since that's the stuff your CPA need to fret about. 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 haven't you informed me about this?" You can be notified and take ownership of your own tax scenarios, of your company's tax scenario to generate more cash flow in your organization and more wealth for yourself.
About Employee Retention Ertc
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, prior to I get into this, I desire to state that nothing in this video is to be taken as legal or tax guidance, this video is for basic educational purposes just, yes, I am a tax and a certified public accountant professional, but I am not your CPA nor your tax expert unless you have engaged my firm. Another disclaimer here, for functions of this video I am presuming that if you're seeing this you are a small company owner, which for employee retention credit functions indicates one hundred or fewer employees for functions of the 2020 credit and five hundred or fewer workers for functions of the 2021 credit, if you have a company with over 5 hundred employees I picture you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you small service owners who may deal with a local tax specialist who is so neck-deep in tax returns today due to the fact that the federal government extended the tax due date to May 17 or volume is simply the nature of their business 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 profitable for company 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? 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 since 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. Originally, in 2020, if you received a PPP loan as an employer, you were not eligible for the employee retention credit.
But the stimulus bill passed in December, the Consolidated Appropriations Act, along with the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it a lot more attractive. So generally the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular girl with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for company 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 inform you why, a couple of factors.
Why Employee Retention Ertc
Reason, the employee retention credit for both 2020 and 2021 is now readily 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 employees and then turn around and declare the employee retention credit on those wages. 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 also maximize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll pail with as numerous costs as possible that do not 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 towards PPP forgiveness, see? You 'd want to dispose all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much regular incomes as possible to take the employee retention credit on.
Another thing to note is you can't subtract the incomes you declared the employee retention credit on, and that makes sense as well, why should the federal government offer you a deduction for these earnings that they already provided you a credit for? Alright, sorry for getting a little sidetracked there, I just like talking about this things, however let's talk about another reason 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 certify for the employee retention credit, you only require to show a 20% decrease in gross receipts compared to the very same calendar quarter in 2019. So this suggests far more companies will certify. My company, for instance, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
I didn't certify for the 2020 employee retention credit initially, since I got first round of PPP money and 2nd because my service didn't suffer that big 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. Also, for 2021, for any quarter, you can elect to utilize the lookback quarter, suggesting that, for instance, even if your Q1 2021 gross receipts aren't a minimum of 20% lower than your Q1 2019 gross invoices, you can compare for functions 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 certify for Q1 2021 based on Q1 2021's gross invoices, you will also receive Q2 2021 given that 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 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 needed to totally or partially suspend operations in your organization 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 period of partial or full shutdown.
Common example, you own a restaurant, and your guv signed an executive order stating that you require to close down indoor dining. That is an example of a partial shutdown. Not just are more businesses 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 same earnings and making more organizations eligible through the 20% decrease limit rather than the 50% decline limit, however the 2021 credit is likewise more profitable than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit amounted to 50% of all qualified salaries for 2020, the employee retention credit was equal to 50% of all qualified incomes you paid staff members between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in salaries for that entire period. The maximum 2020 credit per worker was $5,000. Okay, however that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of qualified salaries per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per worker ... 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 earnings per employee per quarter, so we're talking about an optimum credit of $7,000 per staff member per quarter. If you're eligible all 4 quarters, $7,000 times four is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker. That's substantial. That's a blessing to numerous company owner today. So you see what I mean now, right, how the employee retention credit has gone from awful duckling in 2020 to beautiful swan in 2021, right? And by the method, by the way, qualified wages includes employer-paid health insurance coverage premiums.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to pick the finest covered duration that will get you complete PPP forgiveness however also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just like 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 much easier to qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, because I got very first round of PPP cash and second since my service didn't suffer that large 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 companies eligible for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the exact same earnings and making more organizations eligible through the 20% decrease threshold rather than the 50% decline limit, however the 2021 credit is also more financially 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 incomes per staff member ... for that whole time period?
How to Begin
The very best way is to collaborate with a no-risk, contingency-based cost financial savings business. That will negotiate in support of their clients to obtain the best rates feasible for their existing customers. They will certainly audit old billings for errors getting their clients reimbursements and also tax credits. They can boost the earnings and general appraisal of their clients companies.
Solutions provided can include:
Committed professionals that will interpret extremely intricate program regulations as well as will certainly be offered to address your questions, including:
Exactly how does the PPP financing aspect right into the ERC?
What are the differences between the 2020 and also 2021 programs and just how does it relate to your business?
What are gathering policies for larger, multi-state employers, and how do I interpret several states executive orders?
How do part-time, Union, and tipped workers influence the quantity of my reimbursements?
Comprehensive evaluation concerning your qualification
Comprehensive analysis of your case
Guidance on the declaring procedure as well as paperwork
Specific program proficiency that a normal certified public accountant or pay-roll cpu may not be well-versed in
Quick as well as smooth end-to-end process, from eligibility to claiming as well as receiving 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 Begin? Its Simple.
1. Whichever firm you choose to work with will certainly identify whether your business qualifies and gets approvel for the ERC.
2. They will certainly analyze your claim and calculate the maximum amount you can obtain.
3. Their team overviews you with the declaring process, from starting to finish, including proper paperwork.
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 eligible employers.
You can get refunds for 2020 and 2021 after December 31st of this year, into 2022 as well as 2023. As well as possibly beyond after that too.
Many businesses have received refunds, as well as others, along with reimbursements, additionally qualified to continue getting ERC in every payroll they refine to December 31, 2021, at around 30% of their pay-roll expense.
Some organizations have obtained reimbursements from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can currently get approved for the ERC also if they currently received a PPP funding. Keep in mind, though, that the ERC will just put on salaries not utilized for the PPP.
Do we still certify if we did not sustain a 20% decline in gross receipts .
A federal government authority called for full or partial closure of your service throughout 2020 or 2021. This includes your procedures being limited by business, inability to travel or restrictions of group meetings.
- Gross invoice decrease standards is different for 2020 and 2021, but is measured versus the current quarter as compared to 2019 pre-COVID amounts:
- A federal government authority called for partial or complete shutdown of your company during 2020 or 2021. This includes your procedures being restricted by business, failure to take a trip or restrictions of team meetings.
- Gross invoice decrease requirements is different for 2020 and also 2021, however is gauged against the existing quarter as compared to 2019 pre-COVID quantities.
Do we still qualify if we continued to be open during the pandemic?
Yes. To qualify, your business has to fulfill either one of the following standards:
- Experienced a decline in gross receipts by 20%, or
- Needed to change company operations as a result of government orders
Many products are thought about as adjustments in company operations, including changes in task functions as well as the acquisition of additional safety devices.