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 service owners don't understand about this, or they've found out about it, however they don't know much about it, even many tax experts do not understand the ins and outs of this thing due to the fact that it's brand-new and a great deal of these changesthat are advantageous to business owners 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 profitable, even more rewarding, in reality now than it was in 2020, 5x more profitable at least. Even if you don't own an organization, be sure to share this video with organization owners you know, this video could actually be worth tens of thousands of dollars for them. And if you are an organization owner and after you enjoy this video you wish to talk with me and a member of my group, who will likewise 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 earnings, and let's see if we can get some more cash back in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by minimizing your required 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 things your CPA need to worry about, I am not going to get into the complexities of that type here or the Form 941 and all the payroll things. In this video I wish to inform you what you need to know so you can go to your CPA and say, "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 circumstances, of your service's tax scenario to produce more cash flow in your service and more wealth for yourself.
About Employee Retention Tax Credit Reinstatement Act
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 want to say that nothing in this video is to be taken as legal or tax suggestions, this video is for general informational functions only, yes, I am a CPA and a tax professional, 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 organization owner, which for employee retention credit functions suggests one hundred or fewer staff members for functions of the 2020 credit and five hundred or less staff members for functions of the 2021 credit, if you have a business with over five hundred employees I imagine you have in-house counsel, in-house CPAs who are on top of this things, however I'm here for you small business owners who may deal with a local tax professional who is so neck-deep in income tax return right now since the federal government extended the tax deadline to May 17 or volume is simply the nature of their company 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 talking about 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 in 2015? Well, let's back it up. Yes, the employee retention credit has been around considering that the CARES Act that was passed over a year ago in March 2020, but the employee retention credit didn't get much love in 2015 in 2020 since of the PPP, the Paycheck Protection Program. Originally, in 2020, if you got a PPP loan as a company, you were not eligible for the employee retention credit.
But the stimulus bill passed in December, the Consolidated Appropriations Act, along with the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it much more appealing. Essentially 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 service owners in 2021. Why? Why is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a few reasons.
Why Employee Retention Tax Credit Reinstatement Act
First reason, the employee retention credit for both 2020 and 2021 is now available to PPP recipients, however naturally you can't double dip. You can't get PPP for the hundred thousand dollars you paid your workers and then turn around and claim the employee retention credit on those salaries. The federal government does not look too fondly on paying your payroll for you through the PPP and after that you declaring a credit versus the taxes you pay the federal government on those salaries that the federal government paid for you. That makes 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 select the very best covered period that will get you full PPP forgiveness but likewise maximize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll container with as lots of costs as possible that don't count for employee retention credit purposes. You can't claim the employee retention credit on state joblessness insurance coverage contributions, however state joblessness insurance contributions count toward PPP forgiveness, see? So you 'd want to dispose all your state unemployment insurance contributions on your PPP forgiveness application to leave as much normal salaries as possible to take the employee retention credit on.
Another thing to note is you can't subtract the wages you declared the employee retention credit on, and that makes sense as well, why should the federal government provide you a reduction for these earnings that they currently offered you a credit for? Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, but 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 simpler to qualify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you just need to show a 20% decrease in gross receipts compared to the very same calendar quarter in 2019. So this suggests far more companies will certify. My organization, for example, 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 receive the 2020 employee retention credit first, because I got first round of PPP cash and second since my company didn't suffer that big 50% decrease required to receive the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my business certifies. For 2021, for any quarter, you can choose to use the lookback quarter, implying 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 functions of identifying eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you get approved for Q1 2021 based upon Q1 2021's gross receipts, you will likewise get approved for Q2 2021 because you qualified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just get approved for Q1 and Q3 2021, you also qualify for Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decrease in earnings, you can certify for the employee retention credit if you were required to completely 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 eligible for the employee retention credit throughout that duration of complete or partial shutdown.
Typical example, you own a restaurant, and your governor signed an executive order mentioning that you require to close down indoor dining. That is an example of a partial shutdown. Not just are more services 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 earnings and making more companies eligible through the 20% decline threshold rather than the 50% decline threshold, however the 2021 credit is likewise 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 wages per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that entire time duration? For 2021 the portion 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 a maximum credit of $7,000 per employee 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 duration that will get you full PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just like talking about this things, but let's talk about another reason 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, because I got first round of PPP cash and second since my service didn't suffer that big 50% decrease required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Not just are more organizations qualified for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the very same earnings and making more services eligible through the 20% decline limit rather than the 50% decrease limit, but the 2021 credit is also more rewarding than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of qualified earnings per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that whole time period?
Just How to Start
The most effective method is to collaborate with a no-risk, contingency-based price financial savings company. That will certainly work out in behalf of their customers to get the very best costs possible for their existing clients. They will certainly investigate old invoices for mistakes obtaining for their clients refunds and also credits. They can boost the productivity and overall assessment of their customers organizations.
Services offered can include:
Dedicated professionals that will interpret extremely complicated program policies and also will certainly be offered to answer your concerns, including:
Just how does the PPP loan aspect into the ERC?
What are the distinctions in between the 2020 and 2021 programs and how does it put on your organization?
What are gathering guidelines for larger, multi-state employers, and exactly how do I analyze numerous states executive orders?
Just how do part-time, Union, as well as tipped staff members impact the quantity of my reimbursements?
Detailed evaluation concerning your eligibility
Detailed analysis of your case
Advice on the claiming procedure as well as documents
Particular program know-how that a normal certified public accountant or payroll processor could not be well-versed in
Smooth as well as quick end-to-end procedure, from qualification to asserting as well as receiving refunds
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|Finance Pro Plus
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Prepared To Start? Its Simple.
1. Whichever firm you pick to work with will establish whether your company certifies for the ERC.
2. They will certainly examine your request as well as compute the maximum amount you can get.
3. Their group guides you via the claiming process, from starting to finish, consisting of correct 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 eligible organizations.
You can request reimbursements for 2020 and 2021 after December 31st of this year, into 2022 as well as 2023. As well as potentially past after that too.
Many companies have received reimbursements, and also others, in enhancement to reimbursements, additionally qualified to proceed obtaining ERC in every payroll they refine to December 31, 2021, at close to 30% of their pay-roll cost.
Some services have received refunds from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can currently receive the ERC even if they currently got a PPP loan. Note, though, that the ERC will only use to earnings not utilized for the PPP.
maintain a 20% decline in gross invoices .
A federal government authority required full or partial closure of your organization throughout 2020 or 2021. This includes your procedures being restricted by commerce, inability to take a trip or constraints of team meetings.
- Gross receipt decrease standards is different for 2020 and 2021, yet is gauged against the existing quarter as compared to 2019 pre-COVID amounts:
- A federal government authority needed partial or full closure of your organization during 2020 or 2021. This includes your procedures being limited by business, inability to travel or constraints of group meetings.
- Gross receipt reduction standards is different for 2020 and also 2021, but is gauged versus the current quarter as compared to 2019 pre-COVID amounts.
Do we still certify if we stayed open during the pandemic?
Yes. To certify, your company has to meet either one of the adhering to requirements:
- Experienced a decrease in gross receipts by 20%, or
- Had to change business procedures because of federal government orders
Numerous things are taken into consideration as changes in company procedures, consisting of shifts in task duties and the acquisition of added protective tools.