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 Functions
This is big, a lot of small company owners do not understand about this, or they've become aware of it, but they do not understand much about it, even numerous tax professionals do not know the ins and outs of this thing because it's new and a lot of these modificationsthat are helpful to entrepreneur happened 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 lucrative, much more lucrative, in fact now than it remained in 2020, 5x more financially rewarding a minimum of. So even if you don't own a service, make certain to share this video with service owners you know, this video might literally deserve 10s of thousands of dollars for them. And if you are a business owner and after you enjoy 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 email, [email protected], tell me a little about your service and your ballpark year-over-year earnings, and let's see if we can get some more cash back in your pocket because you can take this credit against your payroll taxes you pay by minimizing your required 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 complexities of that type here or the Form 941 and all the payroll stuff because that's the things your CPA ought to worry about. In this video I wish to inform you what you need to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why haven't you told me about this?" so you can be informed and take ownership of your own tax circumstances, of your company's tax scenario to produce more capital in your organization and more wealth for yourself.
About Employee Retention Ertc
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, prior to I get into this, I desire to say that absolutely nothing in this video is to be taken as legal or tax advice, this video is for basic informational functions only, yes, I am a CPA and a tax expert, but I am not your CPA nor your tax professional unless you have engaged my firm. Another disclaimer here, for functions of this video I am presuming that if you're seeing this you are a small company owner, which for employee retention credit functions indicates one hundred or fewer employees for purposes of the 2020 credit and 5 hundred or fewer staff members for purposes of the 2021 credit, if you have a business with over 5 hundred employees I envision you have in-house counsel, in-house CPAs who are on top of this things, however I'm here for you little organization owners who may work with a regional tax expert who is so neck-deep in income tax return today due to the fact that the government extended the tax deadline to May 17 or volume is just the nature of their company 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 lucrative for company owners in 2021 and why weren't we discussing it in 2020, it's been around ever since, given 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 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. Originally, in 2020, if you received a PPP loan as an employer, you were not qualified for the employee retention credit.
Basically the employee retention credit had a glow-up between 2020 and 2021, it went from the nerdy woman with unkempt eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for company 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 Ertc
Factor, 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 then turn around and claim the employee retention credit on those salaries. If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to choose the best covered duration that will get you full 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 do not count for employee retention credit purposes. For example, you can't declare the employee retention credit on state unemployment insurance coverage contributions, but state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd want to dump all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much ordinary salaries as possible to take the employee retention credit on.
So this can get extremely technical really quickly and it's extremely scenario specific in regards to 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, however just understand that you actually need 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 subtract the wages you declared the employee retention credit on, and that makes sense also, why should the federal government offer you a deduction for these earnings that they already provided you a credit for? Essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply love talking about this things, however let's talk about another reason 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 certify for the employee retention credit, you had to show a 50% reduction in gross invoices compared to the exact same calendar quarter in 2019.
However in 2021, for a quarter to qualify for the employee retention credit, you just need to show a 20% decrease in gross invoices compared to the very same calendar quarter in 2019. So this indicates even more businesses will certify. My business, for example, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.
I didn't qualify for the 2020 employee retention credit initially, because I got very first round of PPP cash and second due to the fact that my organization 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 business certifies. For 2021, for any quarter, you can elect to use the lookback quarter, suggesting 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 get approved for Q1 2021 based upon Q1 2021's gross receipts, you will also receive Q2 2021 given that 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 a sufficient decrease in earnings, you can qualify for the employee retention credit if you were needed to totally or partly suspend operations in your service 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 throughout that period of complete or partial shutdown.
Typical example, you own a dining establishment, and your governor signed an executive order stating that you need to shut down indoor dining. That is an example of a partial shutdown. Not just are more services eligible for the employee retention credit thanks to these brand-new laws, making PPP recipients eligible for the employee retention credit though not on the very same salaries and making more organizations eligible through the 20% decrease threshold rather than the 50% decrease limit, however the 2021 credit is also more rewarding than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit amounted to 50% of all qualified salaries for 2020, the employee retention credit was equivalent to 50% of all certified salaries you paid staff members between March 12, 2020, and December 31, 2020, with a limit of $10,000 in incomes for that entire period. The optimum 2020 credit per staff member was $5,000. Okay, but that's nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of qualified earnings per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per employee ... for that entire period? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on as much as $10,000 in incomes per employee per quarter, so we're talking about an optimum 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 optimum 2021 employee retention credit is $28,000 per worker. That's substantial. That's a blessing to lots of company owner today. So you see what I suggest now, right, how the employee retention credit has gone from awful duckling in 2020 to beautiful swan in 2021, right? And by the way, by the way, certified incomes includes 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 pick the best covered period that will get you full PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply like talking about this stuff, but 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 certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit first, because I got very first round of PPP cash and 2nd because my business didn't suffer that large 50% decrease needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Not only are more organizations qualified for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the exact same salaries and making more services eligible through the 20% decline threshold rather than the 50% decline threshold, but the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of certified salaries per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per employee ... for that whole time duration?
How to Get going
That will certainly negotiate on part of their clients to obtain the ideal rates possible for their existing customers. They will certainly investigate old billings for mistakes getting their clients reimbursements and also credits.
Assistance supplied can include:
Devoted professionals that will certainly analyze extremely complex program rules as well as will certainly be offered to answer your questions, including:
Exactly how does the PPP financing element right into the ERC?
What are the differences between the 2020 as well as 2021 programs and also how does it put on your organization?
What are aggregation guidelines for larger, multi-state employers, as well as just how do I translate numerous states executive orders?
Exactly how do part-time, Union, and also tipped employees impact the amount of my reimbursements?
Extensive evaluation concerning your eligibility
Thorough analysis of your claim
Assistance on the claiming procedure and paperwork
Particular program proficiency that a regular CPA or payroll cpu may not be well-versed in
Smooth and also quick end-to-end process, from eligibility to asserting and also obtaining refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Begin? Its Simple.
1. Whichever firm you select to work with will certainly figure out whether your company qualifies for the ERC.
2. They will certainly examine your request and also compute the optimum amount you can obtain.
3. Their group guides you through the asserting procedure, from beginning to end, including correct paperwork.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 and ends on September 30, 2021, for eligible companies.
You can make an application for refunds for 2020 and also 2021 after December 31st of this year, into 2022 and also 2023. And possibly beyond then also.
Many organizations have received refunds, as well as others, in enhancement to reimbursements, additionally qualified to continue obtaining ERC in every payroll they process through December 31, 2021, at close to 30% of their payroll expense.
Some businesses have received reimbursements from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now get the ERC also if they currently got a PPP lending. Note, though, that the ERC will only relate to salaries not utilized for the PPP.
maintain a 20% decrease in gross billings .
A government authority needed partial or complete shutdown of your service during 2020 or 2021. This includes your procedures being restricted by business, inability to travel or limitations of group meetings.
- Gross invoice reduction criteria is various for 2020 and 2021, but is gauged versus the current quarter as compared to 2019 pre-COVID amounts:
- A federal government authority called for partial or full closure of your company during 2020 or 2021. This includes your operations being limited by commerce, lack of ability to travel or constraints of group conferences.
- Gross receipt reduction criteria is various for 2020 as well as 2021, but is determined versus the existing quarter as contrasted to 2019 pre-COVID quantities.
Do we still qualify if we continued to be open throughout the pandemic?
Yes. To certify, your organization must meet either among the complying with standards:
- Experienced a decrease in gross invoices by 20%, or
- Had to change business procedures due to federal government orders
Numerous things are thought about as modifications in service procedures, consisting of changes in task functions and the acquisition of added safety devices.