
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 big, a lot of little business owners don't understand about this, or they've found out about it, however they don't understand much about it, even many tax professionals do not know the ins and outs of this thing due to the fact that it's new and a great deal of these changes
that are advantageous to entrepreneur 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 lucrative now in 2021, more financially rewarding, far more profitable, in reality now than it was in 2020, 5x more financially rewarding a minimum of. So even if you don't own a business, be sure to share this video with company owner you know, this video might actually deserve 10s of countless dollars for them. And if you are a service owner and after you view this video you desire 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], inform me a little about your service and your ballpark year-over-year income, and let's see if we can get some more refund in your pocket since you can take this credit versus your payroll taxes you pay by reducing 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 kind here or the Form 941 and all the payroll stuff since that's the stuff your CPA must stress over. In this video I wish to inform you what you need to understand so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you informed me about this?" so you can be informed and take ownership of your own tax circumstances, of your organization's tax circumstance to create more cash circulation in your organization and more wealth on your own.

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About Employee Retention Credit 2020
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 enter into this, I wish to say that nothing in this video is to be taken as legal or tax guidance, this video is for general educational purposes just, yes, I am a CPA and a tax professional, however I am not your CPA nor your tax professional unless you have actually engaged my firm as such. Another disclaimer here, for purposes of this video I am presuming that if you're viewing this you are a little service owner, which for employee retention credit functions suggests one hundred or fewer staff members for purposes of the 2020 credit and five hundred or fewer staff members for functions of the 2021 credit, if you have a company with over 5 hundred workers I imagine you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you little organization owners who may deal with a local tax expert who is so neck-deep in income tax return today because the federal government extended the tax deadline to May 17 or volume is just the nature of their service that your tax specialist hasn't had the time to dig into the weeds here like I have.
So employee retention credit, why is it so rewarding for entrepreneur in 2021 and why weren't we discussing it in 2020, it's been around because then, considering 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 actually 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 in 2015 in 2020 because of the PPP, the Paycheck Protection Program. Originally, in 2020, if you received a PPP loan as an employer, you were not qualified for the employee retention credit.
Generally 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 organization owners in 2021. Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Credit 2020
Reason, the employee retention credit for both 2020 and 2021 is now 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 after that turn around and claim the employee retention credit on those wages as well. The federal government doesn't look too fondly on paying your payroll for you through the PPP and after that you declaring a credit against the taxes you pay the federal government on those salaries that the federal government spent for you. So that makes good sense. Now, there's some preparation 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 duration that will get you complete PPP forgiveness however also optimize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll container with as lots of expenses as possible that don't count for employee retention credit purposes. You can't declare the employee retention credit on state unemployment insurance contributions, but state unemployment insurance coverage 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 ordinary incomes as possible to take the employee retention credit on.
So this can get extremely technical extremely fast and it's really circumstance particular in regards to optimizing PPP vs. ERC and my company has tools to figure this things 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 terms of the employee retention credit. Another thing to note is you can't subtract the wages you declared the employee retention credit on, which makes sense too, why should the government give you a reduction for these earnings that they already gave you a credit for? Basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply enjoy speaking about this stuff, but let's talk about another reason that the employee retention credit is more attractive now than it was in 2015, and that is that it's easier to receive the employee retention credit in 2021. In 2020, for a quarter to certify for the employee retention credit, you needed to reveal a 50% reduction in gross invoices compared to the exact same calendar quarter in 2019.
But in 2021, for a quarter to get approved for the employee retention credit, you only require to show a 20% reduction in gross invoices compared to the same calendar quarter in 2019. So this implies even more companies will qualify. 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.
So I didn't get approved for the 2020 employee retention credit first, due to the fact that I got preliminary of PPP money 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 organization qualifies. Likewise, for 2021, for any quarter, you can choose to use 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 qualify for Q1 2021 based on Q1 2021's gross invoices, you will also certify for Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply receive Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Even if you didn't have an enough decline in earnings, you can certify for the employee retention credit if you were required to fully or partly suspend operations in your company throughout any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are qualified for the employee retention credit throughout that duration of partial or complete shutdown.
Typical example, you own a restaurant, and your guv signed an executive order stating that you need to shut 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 new laws, making PPP recipients eligible for the employee retention credit though not on the exact same incomes and making more services eligible through the 20% decline limit rather than the 50% decrease limit, however the 2021 credit is likewise more lucrative than the 2020 credit.
This is because for 2020, the employee retention credit amounted to 50% of all certified incomes for 2020, the employee retention credit amounted to 50% of all certified wages you paid workers between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in salaries for that whole period. So the optimum 2020 credit per worker was $5,000. Okay, however that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of certified incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per worker ... for that whole period? No. Per quarter. For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in salaries per worker per quarter, so we're talking about a maximum credit of $7,000 per worker per quarter. $7,000 times four is $28,000 if you're eligible all four quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's big. That's a godsend to numerous entrepreneur today. You see what I imply now, right, how the employee retention credit has gone from ugly duckling in 2020 to lovely swan in 2021? And by the method, by the method, certified salaries consists of employer-paid health insurance coverage premiums.
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 finest covered period that will get you full 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 factor why the employee retention credit is more attractive now than it was last year, and that is that it's much easier to certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, since I got first round of PPP money and 2nd due to the fact that my company didn't suffer that large 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Not only 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 exact same earnings and making more businesses eligible through the 20% decrease limit rather than the 50% decrease threshold, however the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified wages per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that entire time duration?
Exactly How to Begin
That will bargain on part of their clients to get the best costs possible for their existing clients. They will examine old billings for errors obtaining their clients reimbursements as well as credits.
Services offered can include:
Dedicated specialists that will certainly translate very complex program regulations as well as will be available to answer your questions, including:
Exactly how does the PPP loan aspect into the ERC?
What are the distinctions between the 2020 and also 2021 programs and also just how does it relate to your organization?
What are aggregation policies for larger, multi-state companies, as well as exactly how do I interpret numerous states executive orders?
How do part-time, Union, and tipped staff members affect the quantity of my refunds?
Complete assessment concerning your qualification
Comprehensive evaluation of your situation
Assistance on the declaring procedure as well as documentation
Certain program proficiency that a regular certified public accountant or pay-roll cpu might not be well-versed in
Smooth and also rapid end-to-end process, from eligibility to declaring and getting reimbursements
Adams Brown Strategic Allies and CPAs https://www.adamsbrowncpa.com/ertc-tax-credit-consulting-new-york/ |
Finance Pro Plus https://www.financeproplus.com/ |
Bottom Line Concepts https://erc.bottomlinesavings.com/ |
Equifax Workforce Solutions https://workforce.equifax.com/solutions/employee-retention-credit |
Valiant Capital https://erc.valiant-capital.com/ |
NYC Business https://www1.nyc.gov/nycbusiness/article/nyc-employee-retention-grant-program |
Omega Funding solutions https://www.omegafundingsolutions.com/ |
Disisaster Loan Advisors https://www.disasterloanadvisors.com/ |
ERTC Filing https://info.ertcfiling.com/employee-retention-tax-credit-new-york-11368/ |
Ready To Get Going? Its Simple.
1. Whichever company you select to work with will establish whether your company certifies for the ERC.
2. They will examine your case and compute the maximum quantity you can obtain.
3. Their team overviews you via the claiming process, from beginning to finish, consisting of appropriate documents.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 and right on September 30, 2021, for eligible companies.
You can look for reimbursements 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 as well.
Many companies have received refunds, and also others, in enhancement to reimbursements, also qualified to proceed getting ERC in every payroll they refine to December 31, 2021, at about 30% of their pay-roll cost.
Some organizations have actually received 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 qualify for the ERC also if they currently obtained a PPP financing. Keep in mind, though, that the ERC will just put on salaries not utilized for the PPP.
Do we still qualify if we did not incur a 20% decrease in gross billings .
A government authority needed full or partial shutdown of your organization during 2020 or 2021. This includes your operations being restricted by business, lack of ability to travel or restrictions of team meetings.
- Gross receipt decrease standards is different for 2020 and also 2021, yet is gauged versus the existing quarter as contrasted to 2019 pre-COVID amounts:
- A government authority called for partial or full closure of your company throughout 2020 or 2021. This includes your operations being restricted by commerce, failure to take a trip or constraints of team conferences.
- Gross invoice decrease requirements is various for 2020 as well as 2021, however is gauged against the current quarter as compared to 2019 pre-COVID amounts.
Do we still certify if we continued to be open throughout the pandemic?
Yes. To certify, your organization has to fulfill either among the adhering to standards:
- Experienced a decline in gross receipts by 20%, or
- Needed to change organization procedures due to federal government orders
Numerous items are taken into consideration as adjustments in service operations, including changes in task duties as well as the acquisition of additional protective devices.