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 small organization owners do not understand about this, or they've found out about it, however they do not understand much about it, even many tax experts do not know the ins and outs of this thing because it's brand-new and a great deal of these changesthat are advantageous to organization owners 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 rewarding now in 2021, more lucrative, even more lucrative, in truth now than it was in 2020, 5x more rewarding at least. So even if you do not own a business, make sure to share this video with company owner you know, this video could actually be worth 10s of thousands of dollars for them. And if you are a company owner and after you see this video you wish 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], inform me a little about your service and your ballpark year-over-year revenue, and let's see if we can get some more money back in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by minimizing your needed work tax deposits or you can ask for an advance payment of the credit utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Since that's the stuff your CPA must fret about, I am not going to get into the complexities of that form here or the Form 941 and all the payroll stuff. In this video I desire to inform you what you require to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you informed me about this?" You can be informed and take ownership of your own tax situations, of your service's tax circumstance to generate more money circulation in your company and more wealth for yourself.
About Employee Retention Qualifications
Alright, now let's go 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 wish to say that nothing in this video is to be taken as legal or tax guidance, this video is for basic informative functions only, yes, I am a CPA and a tax professional, however I am not your CPA nor your tax expert unless you have actually engaged my firm as such. Another disclaimer here, for functions of this video I am assuming that if you're watching this you are a small company owner, which for employee retention credit functions implies one hundred or less workers for functions of the 2020 credit and five hundred or fewer employees for purposes of the 2021 credit, if you have a business with over 5 hundred employees 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 might deal with a regional tax professional who is so neck-deep in tax returns right now due to the fact that the government extended the tax due date to May 17 or volume is just the nature of their business that your tax professional hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so lucrative for company owners in 2021 and why weren't we talking about it in 2020, it's been around considering that then, since the CARES Act? Yes, the employee retention credit has been around since 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 due to the fact that of the PPP, the Paycheck Protection Program.
The stimulus expense passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more attractive. Basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy girl with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for service owners in 2021. Why? Why is the employee retention credit more attractive 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 Qualifications
Factor, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, but 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 earnings. If you got PPP and you are qualified 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 however also maximize your employee retention credit.
Also, for PPP forgiveness, you wish to fill up that payroll container with as many expenses as possible that do not count for employee retention credit purposes. For example, you can't declare the employee retention credit on state joblessness insurance contributions, however state unemployment insurance coverage contributions count toward PPP forgiveness, see? You 'd desire to discard all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much ordinary incomes as possible to take the employee retention credit on.
Another thing to note is you can't deduct the wages you declared the employee retention credit on, and that makes sense as well, why should the federal government give you a reduction for these incomes that they currently provided 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 reason 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.
In 2021, for a quarter to certify for the employee retention credit, you just require to reveal a 20% reduction in gross invoices compared to the exact same calendar quarter in 2019. So this suggests much more organizations will certify. My organization, for example, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
So I didn't certify for the 2020 employee retention credit first, because I got very first round of PPP money and second due to the fact that my service didn't suffer that big 50% decrease required to receive the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Likewise, for 2021, for any quarter, you can choose 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 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 given that you certified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply certify for Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based upon the lookback. Also, even if you didn't have an enough decline in income, you can receive the employee retention credit if you were needed to totally 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 qualified for the employee retention credit during that period of partial or complete shutdown.
Typical example, you own a restaurant, and your governor signed an executive order mentioning that you need to close down indoor dining. That is an example of a partial shutdown. Not only 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 very same earnings and making more organizations eligible through the 20% decline limit rather than the 50% decline limit, however the 2021 credit is likewise more profitable than the 2020 credit.
This is since for 2020, the employee retention credit amounted to 50% of all qualified incomes for 2020, the employee retention credit was equivalent to 50% of all qualified earnings you paid staff members between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in earnings for that entire time period. The maximum 2020 credit per worker was $5,000. Okay, however that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of certified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that whole time period? No. Per quarter. So for 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in incomes per staff member per quarter, so we're discussing a maximum credit of $7,000 per employee per quarter. $7,000 times four is $28,000 if you're qualified all 4 quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's big. That's a blessing to lots of service owners right now. So you see what I mean now, right, how the employee retention credit has gone from awful duckling in 2020 to gorgeous swan in 2021, right? And by the method, by the way, certified wages consists of 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 select the finest covered duration that will get you complete PPP forgiveness however 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 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. I didn't qualify 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% decrease needed to certify 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 brand-new laws, making PPP receivers qualified for the employee retention credit though not on the exact same wages and making more companies eligible through the 20% decline limit rather than the 50% decline limit, however the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit because 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 salaries per worker ... for that whole time duration?
Exactly How to Begin
The best way is to collaborate with a no-risk, contingency-based cost financial savings firm. That will work out in support of their customers to get the best prices feasible for their existing clients. They will certainly investigate old billings for mistakes obtaining for their clients refunds and also credits. They can enhance the productivity as well as total evaluation of their customers companies.
Solutions supplied can include:
Committed experts that will certainly analyze extremely intricate program regulations and also will be readily available to answer your concerns, including:
How does the PPP finance element right into the ERC?
What are the distinctions in between the 2020 and 2021 programs as well as how does it use to your business?
What are gathering rules for bigger, multi-state companies, and also how do I translate several states executive orders?
Just how do part-time, Union, and also tipped workers influence the quantity of my reimbursements?
Detailed assessment regarding your qualification
Comprehensive evaluation of your situation
Support on the declaring process and paperwork
Particular program expertise that a normal certified public accountant or pay-roll processor might not be well-versed in
Rapid and also smooth end-to-end process, from eligibility to asserting and also receiving reimbursements
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Start? Its Simple.
1. Whichever firm you select to work with will certainly identify whether your company qualifies and gets approvel for the ERC.
2. They will certainly assess your claim as well as calculate the optimum amount you can get.
3. Their team guides you through the declaring process, from starting to end, consisting of proper documents.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 and ends on September 30, 2021, for eligible companies.
You can get reimbursements for 2020 as well as 2021 after December 31st of this year, right into 2022 and 2023. As well as possibly past after that too.
Many organizations have received reimbursements, and also others, in addition to refunds, also qualified to proceed getting ERC in every pay-roll they refine through December 31, 2021, at about 30% of their payroll cost.
Some organizations have gotten refunds from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can currently get the ERC also if they currently obtained a PPP loan. Keep in mind, though, that the ERC will only put on incomes not utilized for the PPP.
maintain a 20% decline in gross invoices .
A federal government authority needed partial or full shutdown of your service throughout 2020 or 2021. This includes your operations being restricted by commerce, inability to take a trip or restrictions of team conferences.
- Gross invoice decrease criteria is different for 2020 as well as 2021, but is determined versus the existing quarter as contrasted to 2019 pre-COVID quantities:
- A government authority called for partial or complete closure of your organization throughout 2020 or 2021. This includes your procedures being limited by commerce, failure to travel or limitations of team conferences.
- Gross receipt reduction requirements is various for 2020 as well as 2021, however is measured versus the current quarter as compared to 2019 pre-COVID amounts.
Do we still qualify if we stayed open throughout the pandemic?
Yes. To qualify, your organization must fulfill either among the following standards:
- Experienced a decline in gross receipts by 20%, or
- Needed to change company operations because of federal government orders
Many products are taken into consideration as adjustments in business operations, including changes in work functions and the acquisition of added safety equipment.