How It Works
Even if you don't own a company, be sure to share this video with organization owners you understand, this video could actually 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], 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 since you can take this credit against your payroll taxes you pay by minimizing 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 intricacies of that type here or the Form 941 and all the payroll things because that's the stuff your CPA must fret about. In this video I want to inform you what you need to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why haven't you told me about this?" You can be notified and take ownership of your own tax situations, of your organization's tax scenario to produce more cash circulation in your business and more wealth for yourself.
Why Employee Retention Credit Application
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 claim the employee retention credit on those incomes. The federal government does not look too fondly on paying your payroll for you through the PPP and then you declaring a credit versus the taxes you pay the federal government on those wages that the federal government paid for you. So that makes good sense. Now, there's some planning here. If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you need to pick 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 functions. You can't declare the employee retention credit on state unemployment insurance contributions, however state unemployment insurance contributions count towards PPP forgiveness, see? So you 'd want to discard all your state unemployment insurance coverage 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 earnings you claimed the employee retention credit on, and that makes sense as well, why should the federal government provide you a reduction for these salaries that they currently gave you a credit for? Alright, sorry for getting a little sidetracked there, I simply enjoy talking about this things, however 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 easier to qualify 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 receipts compared to the exact same calendar quarter in 2019. This means far more companies will certify. My service, for instance, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
So I didn't certify for the 2020 employee retention credit first, because I got preliminary of PPP money and second since 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 company certifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, implying that, for example, 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 determining 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 also receive Q2 2021 because you qualified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just get approved for Q1 and Q3 2021, you likewise qualify for Q2 and Q4 based upon the lookback. Even if you didn't have an enough decrease in profits, you can certify for the employee retention credit if you were required to totally or partly 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 guv signed an executive order specifying that you require to shut down indoor dining. That is an example of a partial shutdown. Likewise, not only are more companies 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 same wages and making more companies eligible through the 20% decline limit instead of the 50% decrease limit, but the 2021 credit is also more profitable than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit due to the fact that 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 earnings per employee ... for that entire 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 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 staff member.
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 best covered duration that will get you full PPP forgiveness however also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply enjoy talking about this things, but 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. I didn't qualify for the 2020 employee retention credit first, since I got very first round of PPP cash and second because my company 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 service qualifies. Not just are more businesses qualified 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 wages and making more organizations eligible through the 20% decline limit rather than the 50% decrease limit, however the 2021 credit is likewise more lucrative than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of certified salaries per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per staff member ... for that whole time period?
Just How to Begin
That will certainly bargain on part of their clients to get the ideal costs feasible for their existing clients. They will audit old billings for mistakes getting their customers refunds as well as tax credits.
Services provided can include:
Devoted experts that will certainly analyze highly complex program policies and also will certainly be readily available to answer your inquiries, including:
How does the PPP loan element right into the ERC?
What are the distinctions between the 2020 and 2021 programs and also just how does it use to your business?
What are aggregation policies for bigger, multi-state employers, and also how do I analyze several states executive orders?
How do part-time, Union, and tipped employees affect the amount of my refunds?
Extensive examination regarding your qualification
Detailed analysis of your claim
Assistance on the asserting process as well as paperwork
Particular program know-how that a normal CPA or payroll cpu may not be well-versed in
Smooth and quick end-to-end procedure, from eligibility to declaring and obtaining refunds
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|Finance Pro Plus
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|Equifax Workforce Solutions
|Omega Funding solutions
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Ready To Get Going? Its Simple.
1. Whichever company you pick to work with will figure out whether your organization certifies and gets approvel for the ERC.
2. They will examine your case and also compute the optimum amount you can get.
3. Their group guides you with the asserting process, from beginning to end, including appropriate documentation.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and also finishes on September 30, 2021, for eligible companies.
You can request refunds for 2020 as well as 2021 after December 31st of this year, right into 2022 as well as 2023. As well as possibly past then also.
Many companies have received reimbursements, as well as others, along with refunds, additionally qualified to proceed getting ERC in every pay-roll they refine to December 31, 2021, at close to 30% of their payroll cost.
Some organizations 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, businesses can currently receive the ERC even if they already obtained a PPP funding. Note, however, that the ERC will just use to wages not used for the PPP.
maintain a 20% decrease in gross invoices .
A federal government authority needed complete 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 requirements is various for 2020 and also 2021, but is determined versus the current quarter as contrasted to 2019 pre-COVID quantities:
- A government authority called for full or partial shutdown of your business throughout 2020 or 2021. This includes your procedures being limited by business, failure to take a trip or limitations of team conferences.
- Gross receipt reduction requirements is different for 2020 and 2021, however is measured versus the present 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 company has to meet either among the complying with criteria:
- Experienced a decrease in gross invoices by 20%, or
- Had to transform service operations due to federal government orders
Many products are taken into consideration as adjustments in organization operations, including changes in job duties and the purchase of additional protective devices.