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
This is huge, a lot of little service owners don't understand about this, or they've heard about it, however they do not know much about it, even lots of tax professionals don't know the ins and outs of this thing since it's brand-new and a great deal of these modificationsthat are helpful to entrepreneur took place in the middle of tax season. So in this video I'm going to go into the employee retention credit, why it's so profitable now in 2021, more financially rewarding, far more financially rewarding, in fact now than it was in 2020, 5x more rewarding at least. Even if you do not own a company, be sure to share this video with service owners you know, this video might actually be worth tens of thousands of dollars for them. And if you are a company owner and after you watch this video you wish 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 e-mail, [email protected], tell 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.
I am not going to get into the intricacies of that type here or the Form 941 and all the payroll stuff because that's the stuff your CPA should stress about. In this video I desire to tell you what you need to understand so you can go to your CPA and say, "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 scenarios, of your company's tax scenario to create more cash flow in your business and more wealth for yourself.
About Employee Retention 2021 Ertc Qualifications
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 enter into this, I wish to say that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for basic educational purposes just, yes, I am a tax and a cpa professional, however I am not your CPA nor your tax professional unless you have engaged my firm as such. Another disclaimer here, for purposes of this video I am assuming that if you're seeing this you are a small company owner, which for employee retention credit functions suggests one hundred or less employees for purposes of the 2020 credit and five hundred or less employees for purposes of the 2021 credit, if you have a business with over five hundred workers I picture you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you little company owners who may work with a local tax professional who is so neck-deep in income tax return right now because the 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.
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? 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, 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. Initially, in 2020, if you received a PPP loan as a company, you were not eligible for the employee retention credit.
Essentially the employee retention credit had a glow-up 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 is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention 2021 Ertc Qualifications
Reason, the employee retention credit for both 2020 and 2021 is now offered to PPP receivers, 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 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 pick the finest 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 container with as many costs as possible that do not count for employee retention credit functions. For instance, you can't declare the employee retention credit on state unemployment insurance contributions, however state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd desire to dispose all your state joblessness insurance contributions on your PPP forgiveness application to leave as much regular incomes as possible to take the employee retention credit on.
So this can get extremely technical extremely quick and it's really situation specific in terms of optimizing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to go into all that here, but feel in one's bones that you really need to do the mathematics when doing your PPP forgiveness to ensure you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't subtract the wages you claimed the employee retention credit on, which makes sense also, why should the federal government give you a reduction for these incomes that they currently gave you a credit for? Basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply love speaking about this things, but let's discuss another reason that the employee retention credit is more attractive now than it was in 2015, which is that it's much easier to certify for the employee retention credit in 2021. In 2020, for a quarter to certify for the employee retention credit, you had to reveal a 50% decrease in gross invoices compared to the very same calendar quarter in 2019.
In 2021, for a quarter to certify for the employee retention credit, you just require to reveal a 20% decrease in gross invoices compared to the very same calendar quarter in 2019. So this indicates even more businesses will qualify. My organization, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.
So I didn't certify for the 2020 employee retention credit initially, due to the fact that I got preliminary of PPP money and second due to the fact that my service didn't suffer that big 50% decline needed to certify 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, meaning that, for example, even if your Q1 2021 gross receipts aren't at least 20% lower than your Q1 2019 gross invoices, you can compare for purposes 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 qualify for 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.
Same thing for Q2 to Q3 and Q3 to Q4, so generally if you just certify for Q1 and Q3 2021, you also receive Q2 and Q4 based on the lookback. Even if you didn't have an adequate decrease in revenue, you can qualify for the employee retention credit if you were needed to fully 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 partial or full shutdown.
Common example, you own a restaurant, and your governor signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Likewise, not only are more services 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 businesses eligible through the 20% decline limit instead of the 50% decrease limit, but the 2021 credit is likewise more profitable 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 wages per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that whole 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 wages per employee per quarter, so we're talking about an optimum 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 qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to pick the best covered period that will get you complete PPP forgiveness but likewise maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply enjoy 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 qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, since I got very first round of PPP cash and second due to the fact that my organization didn't suffer that large 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. Not just are more businesses qualified for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the same salaries and making more businesses eligible through the 20% decline threshold rather than the 50% decline limit, however the 2021 credit is also more rewarding than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of certified earnings per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in wages per staff member ... for that whole time period?
How to Begin
The best means is to collaborate with a no-risk, contingency-based cost financial savings business. That will work out in behalf of their clients to obtain the most effective costs possible for their existing customers. They will certainly investigate old billings for mistakes obtaining for their customers refunds and also tax credits. They can raise the productivity as well as general appraisal of their clients companies.
Services provided can include:
Dedicated professionals that will certainly translate extremely intricate program policies and will be available to address your concerns, including:
Just how does the PPP loan variable into the ERC?
What are the distinctions in between the 2020 and 2021 programs and just how does it put on your business?
What are gathering policies for larger, multi-state companies, and just how do I translate multiple states executive orders?
How do part-time, Union, as well as tipped workers affect the quantity of my reimbursements?
Extensive assessment regarding your eligibility
Thorough analysis of your situation
Support on the asserting procedure and also paperwork
Certain program expertise that a regular CPA or pay-roll processor may not be well-versed in
Smooth and also rapid end-to-end process, from qualification to declaring as well as receiving refunds
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All Set To Start? Its Simple.
1. Whichever company you select to work with will certainly identify whether your service certifies for the ERC.
2. They will examine your claim as well as calculate the maximum amount you can obtain.
3. Their group guides you with the asserting process, from starting to end, consisting of appropriate paperwork.
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 businesses.
You can get reimbursements for 2020 and also 2021 after December 31st of this year, right into 2022 and 2023. As well as potentially beyond after that too.
Many companies have received refunds, as well as others, in addition to refunds, additionally qualified to continue getting ERC in every payroll they process to December 31, 2021, at around 30% of their pay-roll expense.
Some services have obtained refunds from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, services can currently certify for the ERC also if they currently received a PPP loan. Note, however, that the ERC will only put on earnings not used for the PPP.
Do we still qualify if we did not) sustain a 20% decrease in gross billings .
A federal government authority called for complete or partial shutdown of your company during 2020 or 2021. This includes your procedures being restricted by commerce, inability to travel or limitations of group meetings.
- Gross invoice decrease standards is various for 2020 as well as 2021, however is determined versus the existing quarter as compared to 2019 pre-COVID quantities:
- A federal government authority required partial or complete closure of your organization during 2020 or 2021. This includes your operations being limited by business, inability to travel or limitations of team conferences.
- Gross invoice reduction requirements is various for 2020 and 2021, yet is determined against the present 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 has to meet either one of the adhering to requirements:
- Experienced a decline in gross invoices by 20%, or
- Had to transform service operations due to federal government orders
Several items are considered as adjustments in organization procedures, consisting of changes in task duties and also the purchase of added protective tools.