Why Employee Retention Erc

Reason, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your staff members 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 require to choose the finest covered duration 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 numerous costs as possible that don't count for employee retention credit functions. For instance, you can't declare the employee retention credit on state unemployment insurance contributions, however state unemployment insurance contributions count towards PPP forgiveness, see? So you 'd desire 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 deduct the wages you declared the employee retention credit on, and that makes sense as well, why should the federal government offer you a reduction for these wages that they currently offered you a credit for? Alright, sorry for getting a little sidetracked there, I just like talking about this things, however 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 easier to qualify for the employee retention credit in 2021.

In 2021, for a quarter to qualify for the employee retention credit, you only need to reveal a 20% reduction in gross invoices compared to the same calendar quarter in 2019. So this suggests much more services will certify. My company, for example, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.

So I didn't certify for the 2020 employee retention credit initially, since I got preliminary of PPP cash and 2nd due to the fact that my company didn't suffer that big 50% decrease needed to get approved 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 choose to utilize the lookback quarter, meaning that, for instance, 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 qualify for Q1 2021 based upon Q1 2021's gross receipts, you will likewise receive Q2 2021 because you certified in the lookback quarter of Q1 2021.

Exact same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply certify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Even if you didn't have a sufficient decrease in earnings, you can certify for the employee retention credit if you were required to fully or partially 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 during that duration of full or partial shutdown.

Common 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 just are more services 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 exact same wages and making more businesses eligible through the 20% decrease limit rather than the 50% decrease limit, but the 2021 credit is also more lucrative 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 earnings per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per employee ... for that entire time duration? For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in wages per employee per quarter, so we're talking about a maximum credit of $7,000 per employee per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per worker.


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 duration that will get you complete PPP forgiveness however likewise maximize your employee retention credit.



Alright, sorry for getting a little sidetracked there, I simply like talking about this things, 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 certify for the 2020 employee retention credit initially, since I got first round of PPP cash and 2nd because my business 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 company qualifies. Not just are more organizations eligible for the employee retention credit thanks to these brand-new laws, making PPP receivers eligible for the employee retention credit though not on the same salaries and making more businesses eligible through the 20% decline limit rather than the 50% decrease threshold, but the 2021 credit is likewise more financially rewarding than the 2020 credit.

Not bad, however that's nothing compared to the 2021 credit since 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 salaries per worker ... for that entire time duration?