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
Even if you do not own a service, be sure to share this video with organization owners you understand, this video might actually be worth tens of thousands of dollars for them. And if you are a company owner and after you view 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], inform me a little about your business and your ballpark year-over-year revenue, and let's see if we can get some more money back in your pocket because you can take this credit versus your payroll taxes you pay by lowering your required work tax deposits or you can ask for 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 must stress about, I am not going to get into the complexities of that kind here or the Form 941 and all the payroll stuff. In this video I want to inform you what you require to understand 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 generate more money flow in your company and more wealth for yourself.
About Employee Retention Ertc Credit
Alright, now let's go into this and let's speak about the employee retention credit or the ERC as some folks like to call it, prior to I enter into this, I desire to state that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for general informational functions just, yes, I am a tax and a certified public accountant professional, but I am not your CPA nor your tax professional unless you have engaged my firm as such. Another disclaimer here, for functions of this video I am presuming that if you're watching this you are a small company owner, which for employee retention credit functions means one hundred or fewer workers for purposes of the 2020 credit and five hundred or fewer staff members for purposes of the 2021 credit, if you have a business with over five hundred employees I picture you have in-house counsel, in-house CPAs who are on top of this stuff, however I'm here for you small company owners who might work with a regional tax professional who is so neck-deep in tax returns today because the government extended the tax deadline to May 17 or volume is just the nature of their organization that your tax professional hasn't had the time to go into the weeds here like I have.
So employee retention credit, why is it so financially rewarding for service owners in 2021 and why weren't we talking about it in 2020, it's been around ever since, since 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 because the CARES Act that was passed over a year ago in March 2020, however the employee retention credit didn't get much love in 2015 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.
Generally the employee retention credit had a glow-up between 2020 and 2021, it went from the nerdy lady 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 attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Ertc Credit
Reason, the employee retention credit for both 2020 and 2021 is now 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 declare the employee retention credit on those wages. The federal government doesn't look too fondly on paying your payroll for you through the PPP and after that you declaring a credit against the taxes you pay the federal government on those incomes that the government paid for you. So that makes good 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 pick the very best covered duration that will get you complete PPP forgiveness however likewise optimize your employee retention credit.
Likewise, for PPP forgiveness, you desire to fill up that payroll pail with as lots of expenses as possible that don't count for employee retention credit purposes. For example, you can't claim the employee retention credit on state joblessness insurance contributions, but state joblessness insurance coverage contributions count towards PPP forgiveness, see? So you 'd wish to dump all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much ordinary salaries as possible to take the employee retention credit on.
This can get very technical really fast and it's very situation specific in terms of enhancing PPP vs. ERC and my company has tools to figure this stuff out for you, I'm not going to dig into all that here, however simply understand that you truly have to do the math when doing your PPP forgiveness to make sure 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 earnings you declared the employee retention credit on, and that makes sense as well, why should the federal government offer you a reduction for these earnings that they currently gave you a credit for? Basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, but let's discuss another reason the employee retention credit is more appealing now than it was last year, which is that it's much easier to receive the employee retention credit in 2021. In 2020, for a quarter to get approved for the employee retention credit, you needed to show a 50% decrease in gross receipts compared to the exact same calendar quarter in 2019.
In 2021, for a quarter to qualify for the employee retention credit, you only need to reveal a 20% decrease in gross receipts compared to the same calendar quarter in 2019. This indicates far more services will qualify. My service, for example, experienced a 26% decline in gross invoices, 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 first, due to the fact that I got very first round of PPP cash and second since my company didn't suffer that big 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. For 2021, for any quarter, you can elect 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 figuring out eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Ramification here is that if you certify for Q1 2021 based upon Q1 2021's gross receipts, you will also receive 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 simply receive Q1 and Q3 2021, you likewise qualify for Q2 and Q4 based upon the lookback. Even if you didn't have a sufficient decrease in income, you can qualify for the employee retention credit if you were required 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 complete shutdown.
Typical example, you own a restaurant, and your guv signed an executive order stating that you need to close down indoor dining. That is an example of a partial shutdown. Also, not only are more businesses 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 services eligible through the 20% decline limit instead of the 50% decrease threshold, but the 2021 credit is likewise more rewarding than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of certified wages per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per staff member ... for that entire time period? For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in salaries per employee per quarter, so we're talking about a maximum credit of $7,000 per worker per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per staff member.
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 duration that will get you full PPP forgiveness however also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just enjoy 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 much easier to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, because I got very first round of PPP money and 2nd because my service 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 qualifies. Not just are more businesses qualified for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the very same salaries and making more businesses eligible through the 20% decline threshold rather than the 50% decrease threshold, however the 2021 credit is likewise more profitable than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit since for 2021, the credit is equivalent 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 period?
Just How to Start
That will negotiate on part of their clients to obtain the best costs possible for their existing customers. They will audit old billings for errors obtaining their customers refunds and also credits.
Assistance offered can include:
Devoted professionals that will interpret highly complicated program rules and also will certainly be offered to answer your concerns, including:
Just how does the PPP funding factor right into the ERC?
What are the distinctions in between the 2020 and 2021 programs and also just how does it relate to your company?
What are gathering rules for larger, multi-state employers, and just how do I translate numerous states executive orders?
Just how do part-time, Union, as well as tipped employees affect the amount of my reimbursements?
Complete analysis concerning your eligibility
Comprehensive analysis of your case
Assistance on the declaring procedure and documents
Certain program know-how that a routine certified public accountant or pay-roll processor could not be well-versed in
Rapid and smooth end-to-end procedure, from eligibility to claiming and obtaining reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
All Set To Get Going? Its Simple.
1. Whichever company you choose to work with will certainly figure out whether your service certifies for the ERC.
2. They will certainly assess your claim and compute the optimum amount you can obtain.
3. Their team overviews you with the declaring process, from beginning to finish, including proper paperwork.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 as well as finishes on September 30, 2021, for eligible businesses.
You can make an application for reimbursements for 2020 and also 2021 after December 31st of this year, right into 2022 and 2023. As well as possibly past after that too.
Many organizations have received refunds, as well as others, along with reimbursements, also qualified to proceed obtaining ERC in every payroll they process to December 31, 2021, at about 30% of their payroll cost.
Some companies have received reimbursements from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, businesses can now get the ERC also if they currently received a PPP financing. Keep in mind, however, that the ERC will only apply to incomes not used for the PPP.
Do we still qualify if we did not sustain a 20% decline in gross invoices .
A federal government authority called for partial or complete closure of your company throughout 2020 or 2021. This includes your procedures being limited by commerce, failure to take a trip or restrictions of group meetings.
- Gross receipt decrease standards is various for 2020 as well as 2021, however is measured versus the present quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority required partial or complete shutdown of your service during 2020 or 2021. This includes your operations being limited by commerce, lack of ability to travel or limitations of group meetings.
- Gross receipt decrease criteria is different for 2020 as well as 2021, yet 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 qualify, your business must meet either among the adhering to requirements:
- Experienced a decline in gross receipts by 20%, or
- Had to alter business procedures due to government orders
Several products are thought about as changes in business procedures, including shifts in work roles and also the acquisition of added safety equipment.