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 Functions
Even if you do not own a business, be sure to share this video with company owners you know, this video might literally be worth tens of thousands of dollars for them. And if you are a business owner and after you view 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], inform me a little about your organization and your ballpark year-over-year income, and let's see if we can get some more money back in your pocket because you can take this credit against your payroll taxes you pay by decreasing 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.
Since that's the stuff your CPA must stress about, I am not going to get into the complexities of that kind here or the Form 941 and all the payroll things. In this video I desire to tell you what you require to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why haven't you told me about this?" You can be informed and take ownership of your own tax circumstances, of your organization's tax circumstance to generate more cash flow in your organization and more wealth for yourself.
About Employee Retention Ertc Credit
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 want to state that absolutely nothing in this video is to be taken as legal or tax recommendations, this video is for basic informative purposes just, yes, I am a tax and a certified public accountant professional, but I am not your CPA nor your tax professional unless you have engaged my company. Another disclaimer here, for functions of this video I am assuming that if you're enjoying this you are a small company owner, which for employee retention credit purposes means one hundred or less employees for purposes of the 2020 credit and five hundred or fewer staff members for functions of the 2021 credit, if you have a business with over five hundred workers I envision you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small company owners who may deal with a local tax specialist who is so neck-deep in tax returns today because the federal government extended the tax deadline to May 17 or volume is just the nature of their service that your tax professional hasn't had the time to dig into the weeds here like I have.
So employee retention credit, why is it so financially rewarding for business owners in 2021 and why weren't we speaking about it in 2020, it's been around since then, because 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 because the CARES Act that was passed over a year ago in March 2020, however the employee retention credit didn't get much love last year in 2020 because of the PPP, the Paycheck Protection Program. Originally, in 2020, if you got a PPP loan as an employer, you were not eligible for the employee retention credit.
Essentially the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy lady with neglected eyebrows and thick glasses 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 Ertc Credit
Reason, the employee retention credit for both 2020 and 2021 is now readily 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 employees and then turn around and claim the employee retention credit on those earnings. The government does not look too fondly on paying your payroll for you through the PPP and after that you claiming a credit versus the taxes you pay the federal government on those incomes that the federal government paid for you. So that makes good sense. Now, there's some preparation here. 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 duration that will get you full PPP forgiveness but likewise optimize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll pail with as lots of expenses as possible that don't count for employee retention credit purposes. You can't claim the employee retention credit on state unemployment insurance coverage contributions, however state joblessness insurance coverage contributions count toward PPP forgiveness, see? So you 'd desire to discard all your state joblessness insurance contributions on your PPP forgiveness application to leave as much common salaries as possible to take the employee retention credit on.
Another thing to note is you can't deduct the salaries you declared 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 already 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.
In 2021, for a quarter to qualify for the employee retention credit, you only need to reveal a 20% decrease in gross invoices compared to the very same calendar quarter in 2019. So this suggests much more companies will qualify. My organization, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.
I didn't certify for the 2020 employee retention credit first, due to the fact that I got first round of PPP money and 2nd due to the fact that my business 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 service certifies. For 2021, for any quarter, you can elect to use the lookback quarter, suggesting that, for example, even if your Q1 2021 gross receipts aren't at least 20% lower than your Q1 2019 gross receipts, 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 get approved for Q1 2021 based on Q1 2021's gross invoices, you will also receive Q2 2021 given 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 get approved for Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based on the lookback. Even if you didn't have an enough decrease in revenue, you can certify for the employee retention credit if you were required to fully 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 full or partial shutdown.
Typical example, you own a dining establishment, and your governor signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Also, not just are more businesses eligible 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 incomes and making more businesses eligible through the 20% decline threshold rather than the 50% decrease threshold, but the 2021 credit is also more profitable than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of qualified incomes per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that entire time period? For 2021 the percentage 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 a maximum credit of $7,000 per employee per quarter. That's right, folks, the optimum 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 need to choose the best covered duration that will get you full PPP forgiveness but likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just like talking about this stuff, 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 easier to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, because I got very first round of PPP money and 2nd because my business didn't suffer that large 50% decrease required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my service qualifies. Not only are more companies eligible for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the same wages and making more services eligible through the 20% decrease limit rather than 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 since for 2021, the credit is equal to 70% of qualified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per staff member ... for that entire time period?
Exactly How to Begin
That will certainly bargain on behalf of their customers to get the ideal costs possible for their existing clients. They will certainly investigate old billings for errors obtaining their customers refunds and credits.
Services provided can include:
Dedicated professionals that will analyze very intricate program guidelines and also will be offered to address your concerns, including:
Just how does the PPP financing aspect right into the ERC?
What are the distinctions in between the 2020 and also 2021 programs and also exactly how does it apply to your organization?
What are aggregation policies for bigger, multi-state companies, and also just how do I translate several states executive orders?
How do part-time, Union, and also tipped staff members impact the quantity of my refunds?
Comprehensive assessment regarding your eligibility
Thorough evaluation of your claim
Advice on the declaring procedure as well as documentation
Specific program proficiency that a normal CPA or pay-roll cpu might not be well-versed in
Rapid and also smooth end-to-end procedure, from qualification to asserting as well as obtaining reimbursements
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|Finance Pro Plus
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Ready To Get Started? Its Simple.
1. Whichever company you pick to work with will certainly establish whether your company certifies for the ERC.
2. They will certainly examine your request as well as compute the maximum quantity you can get.
3. Their team guides you via the claiming process, from beginning to end, including appropriate documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 as well as finishes on September 30, 2021, for eligible businesses.
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 beyond after that also.
Many businesses have received reimbursements, as well as others, in addition to refunds, additionally certified to continue receiving ERC in every pay-roll they process through December 31, 2021, at around 30% of their payroll expense.
Some businesses have received refunds from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can now qualify for the ERC also if they currently received a PPP funding. Note, though, that the ERC will only relate to incomes not made use of for the PPP.
Do we still qualify if we did not) incur a 20% decrease in gross receipts .
A federal government authority needed complete or partial closure of your business during 2020 or 2021. This includes your operations being restricted by business, inability to take a trip or restrictions of group meetings.
- Gross invoice reduction standards is various for 2020 and also 2021, yet is gauged versus the current quarter as contrasted to 2019 pre-COVID amounts:
- A federal government authority needed partial or full closure of your organization throughout 2020 or 2021. This includes your procedures being restricted by business, failure to travel or restrictions of group conferences.
- Gross invoice decrease requirements is different for 2020 and 2021, yet is determined against the existing quarter as compared to 2019 pre-COVID amounts.
Do we still certify if we continued to be open during the pandemic?
Yes. To certify, your company should fulfill either one of the complying with standards:
- Experienced a decline in gross invoices by 20%, or
- Needed to change business operations because of federal government orders
Many items are thought about as changes in business procedures, including changes in task roles and the purchase of additional protective equipment.