
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.
Exactly How It Works
Even if you do not own an organization, be sure to share this video with business owners you know, this video might actually be worth 10s of thousands of dollars for them. And if you are an organization owner and after you watch this video you want 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 email, [email protected], tell me a little about your service and your ballpark year-over-year income, and let's see if we can get some more money back in your pocket since 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 utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Since 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 want to inform you what you require to understand so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you told me about this?" You can be informed and take ownership of your own tax scenarios, of your business's tax scenario to produce more money circulation in your business and more wealth for yourself.
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About Employee Retention Credit Irs
Alright, now let's dig into this and let's discuss the employee retention credit or the ERC as some folks like to call it, before I get into this, I want to say that nothing in this video is to be taken as legal or tax advice, this video is for general educational functions only, yes, I am a tax and a certified public accountant expert, but I am not your CPA nor your tax expert unless you have engaged my firm as such. Another disclaimer here, for purposes of this video I am assuming that if you're enjoying this you are a small company owner, which for employee retention credit purposes means one hundred or fewer workers for purposes of the 2020 credit and 5 hundred or fewer staff members for functions of the 2021 credit, if you have a company with over five hundred staff members I imagine you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you small business owners who may deal with a regional tax expert who is so neck-deep in income tax return today since the federal government extended the tax deadline to May 17 or volume is simply the nature of their business that your tax professional hasn't had the time to dig into the weeds here like I have.
So employee retention credit, why is it so financially rewarding for company owner in 2021 and why weren't we discussing it in 2020, it's been around ever since, considering that the CARES Act? Why is it getting all this buzz now that it wasn't in 2015? Well, let's back it up. Yes, the employee retention credit has actually been around given that 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 nerdy girl with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for business 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 Credit Irs
Very first factor, the employee retention credit for both 2020 and 2021 is now readily 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 then turn around and declare the employee retention credit on those incomes. The government doesn't look too fondly on paying your payroll for you through the PPP and after that you claiming a credit against the taxes you pay the government on those earnings that the government spent for you. That makes sense. Now, there's some preparation here. 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 very best covered duration that will get you full PPP forgiveness but also optimize your employee retention credit.
Also, for PPP forgiveness, you desire to fill that payroll container with as many expenses as possible that don't count for employee retention credit purposes. For instance, you can't declare the employee retention credit on state joblessness insurance coverage contributions, but state unemployment insurance coverage contributions count towards PPP forgiveness, see? You 'd want to discard all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much normal incomes as possible to take the employee retention credit on.
So this can get extremely technical very quick and it's really situation particular in terms of enhancing PPP vs. ERC and my firm has tools to figure this things out for you, I'm not going to go into all that here, but simply know that you truly have to do the mathematics when doing your PPP forgiveness to make certain you're not leaving anything on the table in terms of the employee retention credit. 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 offer you a deduction for these earnings that they already offered you a credit for? So essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just love discussing this stuff, but let's talk about another reason why the employee retention credit is more appealing now than it was in 2015, and that is that it's easier to get approved for the employee retention credit in 2021. In 2020, for a quarter to receive the employee retention credit, you needed to show 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 reveal a 20% decline in gross invoices compared to the exact same calendar quarter in 2019. So this suggests much more organizations will certify. My company, for instance, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.
I didn't qualify for the 2020 employee retention credit first, due to the fact that I got first round of PPP money and second because my company didn't suffer that big 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Also, for 2021, for any quarter, you can choose to use the lookback quarter, suggesting that, for example, even if your Q1 2021 gross invoices aren't a minimum of 20% lower than your Q1 2019 gross receipts, 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 certify for Q1 2021 based on Q1 2021's gross invoices, you will likewise qualify for Q2 2021 given 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 get approved for Q1 and Q3 2021, you also get approved for Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decrease in income, you can qualify for the employee retention credit if you were needed to fully or partially suspend operations in your business 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 during that duration of partial or complete shutdown.
Common example, you own a restaurant, and your governor signed an executive order stating that you require to shut down indoor dining. That is an example of a partial shutdown. Likewise, not just are more services qualified for the employee retention credit thanks to these brand-new laws, making PPP receivers eligible for the employee retention credit though not on the exact same incomes and making more services eligible through the 20% decrease threshold rather than the 50% decline limit, however the 2021 credit is likewise more lucrative than the 2020 credit.
This is since for 2020, the employee retention credit was equivalent to 50% of all certified earnings for 2020, the employee retention credit amounted to 50% of all certified wages you paid employees between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in incomes for that entire time period. The maximum 2020 credit per staff member was $5,000. Not bad, however that's nothing compared to the 2021 credit because for 2021, the credit amounts to 70% of qualified incomes per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per staff member ... for that entire 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 earnings per employee per quarter, so we're speaking about a maximum credit of $7,000 per worker per quarter. If you're qualified all 4 quarters, $7,000 times 4 is $28,000. That's right, folks, the optimum 2021 employee retention credit is $28,000 per employee. That's substantial. That's a blessing to many company owners right now. You see what I imply now, right, how the employee retention credit has gone from unsightly duckling in 2020 to lovely swan in 2021? And by the way, by the method, qualified incomes 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 require to select the best covered period that will get you complete PPP forgiveness however also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just like talking about this things, however 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 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 2nd since my organization didn't suffer that large 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. 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 exact same incomes and making more businesses eligible through the 20% decrease limit rather than the 50% decline limit, but the 2021 credit is also more financially rewarding than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that whole time duration?
How to Get going
The very best way is to deal with a no-risk, contingency-based cost financial savings firm. That will bargain in support of their customers to obtain the very best rates possible for their existing clients. They will audit old invoices for errors obtaining for their customers reimbursements and tax credits. They can increase the profitability as well as general evaluation of their customers organizations.
Assistance supplied can include:
Devoted professionals that will interpret extremely intricate program regulations and will certainly be readily available to answer your inquiries, including:
Exactly how does the PPP loan factor into the ERC?
What are the distinctions in between the 2020 as well as 2021 programs and also exactly how does it relate to your business?
What are aggregation policies for bigger, multi-state companies, as well as just how do I translate several states executive orders?
Just how do part-time, Union, and tipped staff members influence the amount of my reimbursements?
Comprehensive examination regarding your qualification
Detailed evaluation of your claim
Guidance on the asserting process and documents
Details program knowledge that a regular CPA or pay-roll processor might not be well-versed in
Smooth and rapid end-to-end procedure, from qualification to asserting and also obtaining 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/ |
All Set To Start? Its Simple.
1. Whichever company you choose to work with will figure out whether your company qualifies and gets approvel for the ERC.
2. They will assess your request and compute the optimum quantity you can obtain.
3. Their group guides you through the claiming procedure, from beginning to finish, including appropriate documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 as well as right on September 30, 2021, for eligible employers.
You can request reimbursements for 2020 as well as 2021 after December 31st of this year, into 2022 and 2023. And also potentially past then as well.
Many companies have received refunds, and others, along with reimbursements, additionally certified to continue obtaining ERC in every payroll they refine through December 31, 2021, at about 30% of their payroll cost.
Some organizations have obtained reimbursements 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 get the ERC even if they currently received a PPP loan. Note, however, that the ERC will just relate to incomes not made use of for the PPP.
sustain a 20% reduction in gross invoices .
A federal government authority called for partial or complete shutdown of your company throughout 2020 or 2021. This includes your operations being limited by business, lack of ability to travel or limitations of group conferences.
- Gross invoice reduction standards is different for 2020 and also 2021, yet is measured against the present quarter as contrasted to 2019 pre-COVID quantities:
- A government authority called for complete or partial closure of your business throughout 2020 or 2021. This includes your operations being restricted by business, lack of ability to travel or constraints of team meetings.
- Gross receipt decrease requirements is various for 2020 as well as 2021, yet is measured against the current quarter as compared to 2019 pre-COVID amounts.
Do we still qualify if we continued to be open during the pandemic?
Yes. To certify, your business has to satisfy either one of the following criteria:
- Experienced a decrease in gross invoices by 20%, or
- Needed to transform organization procedures as a result of government orders
Several products are taken into consideration as modifications in company operations, including shifts in work duties and the purchase of additional protective equipment.