How It Works
Even if you don't own a business, be sure to share this video with company owners you understand, this video might literally be worth 10s of thousands of dollars for them. And if you are a business owner and after you enjoy 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 email, [email protected], tell me a little about your company and your ballpark year-over-year profits, 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 reducing your needed work tax deposits or you can request an advance payment of the credit utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Because that's the stuff your CPA need to worry about, I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll things. In this video I desire to tell you what you need 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 notified and take ownership of your own tax circumstances, of your service's tax circumstance to create more cash flow in your company and more wealth for yourself.
Why Employee Retention Credit Eligibility
Factor, 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 workers 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 best covered period that will get you full PPP forgiveness however likewise maximize your employee retention credit.
Likewise, for PPP forgiveness, you wish to fill up that payroll pail with as numerous costs as possible that don't count for employee retention credit functions. For example, you can't claim the employee retention credit on state unemployment insurance contributions, however state unemployment insurance contributions count toward PPP forgiveness, see? You 'd want to dispose all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much common wages as possible to take the employee retention credit on.
So this can get really technical very fast and it's extremely scenario specific in terms of optimizing PPP vs. ERC and my firm has tools to figure this things out for you, I'm not going to dig into all that here, but feel in one's bones that you really need to do the math when doing your PPP forgiveness to make certain you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't deduct the earnings you declared the employee retention credit on, which makes sense also, why should the government provide you a deduction for these incomes that they already gave you a credit for? So basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply like talking about this things, but let's discuss another reason that the employee retention credit is more appealing now than it was in 2015, and that is that it's much easier to qualify for the employee retention credit in 2021. In 2020, for a quarter to get approved for the employee retention credit, you had to reveal a 50% reduction in gross invoices compared to the exact same calendar quarter in 2019.
In 2021, for a quarter to certify for the employee retention credit, you just require to show a 20% reduction in gross receipts compared to the same calendar quarter in 2019. So this implies even more organizations will qualify. My business, for instance, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
I didn't qualify for the 2020 employee retention credit first, due to the fact that I got first round of PPP cash and second since my business didn't suffer that big 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company certifies. Also, for 2021, for any quarter, you can elect to utilize 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 receipts, 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 get approved for Q1 2021 based upon Q1 2021's gross invoices, you will also certify for 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 also get approved for Q2 and Q4 based on the lookback. Also, even if you didn't have an adequate decline in profits, you can get approved for the employee retention credit if you were needed to completely or partially suspend operations in your organization 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 period of partial or full shutdown.
Typical example, you own a restaurant, and your governor signed an executive order specifying that you need to shut down indoor dining. That is an example of a partial shutdown. Also, not just are more companies eligible for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the exact same wages and making more organizations eligible through the 20% decline limit rather than the 50% decline threshold, however the 2021 credit is likewise more financially rewarding than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of certified incomes per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... 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 incomes per employee per quarter, so we're talking about an optimum credit of $7,000 per worker per quarter. That's right, folks, the maximum 2021 employee retention credit is $28,000 per employee.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to select the best covered period that will get you complete PPP forgiveness but likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, 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. I didn't qualify for the 2020 employee retention credit first, since I got very first round of PPP cash and 2nd since my service 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 service certifies. Not just are more organizations qualified 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 incomes and making more companies eligible through the 20% decrease limit rather than the 50% decrease limit, but the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of qualified wages per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per employee ... for that whole time duration?
Just How to Start
That will certainly work out on behalf of their clients to get the finest costs feasible for their existing clients. They will audit old invoices for mistakes getting their clients refunds and also tax credits.
Assistance supplied can include:
Committed specialists that will interpret extremely complex program rules as well as will certainly be readily available to answer your questions, including:
Exactly how does the PPP finance aspect into the ERC?
What are the distinctions in between the 2020 and 2021 programs and also how does it apply to your company?
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 also tipped employees impact the amount of my reimbursements?
Complete evaluation regarding your qualification
Extensive analysis of your case
Guidance on the claiming process as well as documentation
Specific program experience that a regular certified public accountant or payroll cpu might not be well-versed in
Fast as well as smooth end-to-end process, from eligibility to claiming and also receiving reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Begin? Its Simple.
1. Whichever company you select to work with will certainly identify whether your organization qualifies and gets approvel for the ERC.
2. They will analyze your request and also calculate the optimum quantity you can receive.
3. Their group overviews you with the claiming procedure, from beginning to end, consisting of appropriate documents.
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 employers.
You can make an application for refunds for 2020 and 2021 after December 31st of this year, right into 2022 as well as 2023. And potentially beyond after that as well.
Many services have received refunds, and also others, along with reimbursements, also qualified to continue obtaining ERC in every payroll they refine through December 31, 2021, at around 30% of their payroll cost.
Some businesses have actually gotten 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 currently get approved for the ERC also if they already obtained a PPP finance. Keep in mind, though, that the ERC will only use to incomes not made use of for the PPP.
Do we still certify if we did not incur a 20% decrease in gross billings .
A government authority required complete or partial closure of your company throughout 2020 or 2021. This includes your procedures being limited by commerce, failure to take a trip or constraints of group meetings.
- Gross invoice decrease criteria is different for 2020 and also 2021, however is measured versus the existing quarter as compared to 2019 pre-COVID amounts:
- A federal government authority called for partial or complete shutdown of your business during 2020 or 2021. This includes your procedures being limited by commerce, inability to travel or limitations of team conferences.
- Gross invoice decrease criteria is different for 2020 and 2021, but is determined versus the existing quarter as compared to 2019 pre-COVID amounts.
Do we still certify if we stayed open throughout the pandemic?
Yes. To qualify, your business has to satisfy either one of the adhering to requirements:
- Experienced a decline in gross receipts by 20%, or
- Needed to alter business operations due to government orders
Several things are considered as modifications in service operations, including shifts in task functions and the acquisition of extra safety tools.