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 Works
Even if you do not own a business, be sure to share this video with business owners you know, this video could literally be worth tens of thousands of dollars for them. And if you are a business owner and after you view this video you want to talk with me and a member of my team, who will likewise 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 earnings, and let's see if we can get some more cash back in your pocket since you can take this credit versus your payroll taxes you pay by minimizing your needed employment 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 worry about, I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll stuff. In this video I wish to tell 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 situations, of your company's tax situation to generate more money flow in your company and more wealth for yourself.
About Employee Retention Qualifications
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, before I get into this, I want to state that absolutely nothing in this video is to be taken as legal or tax suggestions, this video is for general informational purposes just, yes, I am a tax and a certified public accountant expert, but I am not your CPA nor your tax expert unless you have actually engaged my firm. Another disclaimer here, for purposes of this video I am presuming that if you're enjoying this you are a small company owner, which for employee retention credit purposes means one hundred or fewer employees 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 imagine you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small company owners who may deal with a regional tax specialist who is so neck-deep in income tax return right now since the government extended the tax deadline to May 17 or volume is simply the nature of their service that your tax professional hasn't had the time to dig into the weeds here like I have.
Employee retention credit, why is it so profitable for service owners in 2021 and why weren't we talking about it in 2020, it's been around since then, considering that the CARES Act? Yes, the employee retention credit has actually been around since 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.
However the stimulus bill passed in December, the Consolidated Appropriations Act, in addition to the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more appealing. So generally the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular lady with unkempt eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for entrepreneur 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 couple of factors.
Why Employee Retention Qualifications
Reason, the employee retention credit for both 2020 and 2021 is now offered to PPP receivers, however of course 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 incomes. The federal government does not look too fondly on paying your payroll for you through the PPP and then you declaring a credit against the taxes you pay the federal government on those wages that the federal government paid for you. That makes sense. Now, there's some planning 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 best covered duration that will get you full PPP forgiveness however likewise optimize your employee retention credit.
Also, for PPP forgiveness, you want to fill up that payroll container with as lots of expenses as possible that don't count for employee retention credit functions. You can't claim the employee retention credit on state unemployment insurance coverage contributions, but state joblessness insurance contributions count toward PPP forgiveness, see? You 'd desire to dump all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much regular salaries as possible to take the employee retention credit on.
So this can get extremely technical extremely fast and it's very circumstance 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, however simply know that you really have to do the math when doing your PPP forgiveness to ensure 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 salaries you declared the employee retention credit on, which makes good sense as well, why should the federal government provide you a reduction for these earnings that they already offered you a credit for? Basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply like speaking about this things, however let's speak 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 certify for the employee retention credit in 2021. In 2020, for a quarter to certify for the employee retention credit, you needed to show a 50% reduction in gross invoices compared to the very same calendar quarter in 2019.
In 2021, for a quarter to qualify for the employee retention credit, you only require to show a 20% decrease in gross receipts compared to the very same calendar quarter in 2019. So this implies much more companies will certify. My service, for instance, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
I didn't certify for the 2020 employee retention credit initially, since I got first round of PPP money and second 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. Likewise, for 2021, for any quarter, you can elect to utilize the lookback quarter, implying that, for instance, even if your Q1 2021 gross receipts aren't at least 20% lower than your Q1 2019 gross invoices, you can compare for functions 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 receive Q1 2021 based upon Q1 2021's gross receipts, you will likewise receive Q2 2021 given that you certified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so generally if you just receive Q1 and Q3 2021, you also certify for Q2 and Q4 based upon the lookback. Even if you didn't have an enough decline in revenue, you can qualify for the employee retention credit if you were required to completely or partly suspend operations in your business 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 period of complete or partial shutdown.
Typical example, you own a restaurant, and your guv signed an executive order specifying that you need to shut down indoor dining. That is an example of a partial shutdown. Likewise, not only are more organizations eligible 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 wages and making more services eligible through the 20% decrease threshold rather than the 50% decline limit, but the 2021 credit is likewise more financially rewarding than the 2020 credit.
This is since for 2020, the employee retention credit amounted to 50% of all certified earnings for 2020, the employee retention credit was equivalent to 50% of all qualified salaries you paid workers in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in incomes for that whole period. So the optimum 2020 credit per employee was $5,000. Okay, however that's nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified earnings per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per staff member ... for that whole time period? No. Per quarter. So for 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on approximately $10,000 in earnings per worker per quarter, so we're discussing a maximum credit of $7,000 per worker per quarter. $7,000 times 4 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 huge. That's a blessing to many entrepreneur today. So you see what I suggest now, right, how the employee retention credit has gone from ugly duckling in 2020 to lovely swan in 2021, right? And by the way, by the method, qualified salaries 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 complete PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just like talking about this stuff, 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 qualify for the employee retention credit in 2021. 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 2nd since my service didn't suffer that large 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Not just are more services 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 organizations eligible through the 20% decrease limit rather than the 50% decline limit, but the 2021 credit is likewise more rewarding than the 2020 credit.
Not bad, however 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 staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that whole time period?
How to Begin
That will bargain on part of their clients to obtain the ideal costs feasible for their existing customers. They will investigate old invoices for errors obtaining their customers refunds as well as tax credits.
Services supplied can include:
Dedicated experts that will analyze very intricate program regulations and also will certainly be available to answer your inquiries, including:
Exactly how does the PPP lending element right into the ERC?
What are the distinctions in between the 2020 and also 2021 programs and also exactly how does it use to your business?
What are aggregation policies for bigger, multi-state companies, and how do I analyze several states executive orders?
How do part-time, Union, and also tipped staff members impact the quantity of my reimbursements?
Complete examination regarding your qualification
Comprehensive evaluation of your situation
Advice on the asserting procedure and also documentation
Details program expertise that a routine certified public accountant or payroll processor may not be well-versed in
Smooth and also quick end-to-end process, from qualification to asserting and also getting 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 firm you choose to work with will establish whether your organization certifies and gets approvel for the ERC.
2. They will analyze your request and calculate the optimum amount you can get.
3. Their team guides you via the claiming procedure, from beginning to finish, including appropriate documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 and also ends on September 30, 2021, for qualified companies.
You can make an application for refunds for 2020 as well as 2021 after December 31st of this year, into 2022 and 2023. As well as potentially beyond after that also.
Many businesses have received reimbursements, as well as others, in addition to refunds, additionally certified to continue obtaining ERC in every payroll they process through December 31, 2021, at close to 30% of their payroll expense.
Some businesses have actually obtained refunds from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can now qualify for the ERC also if they already obtained a PPP car loan. Note, however, that the ERC will only use to wages not utilized for the PPP.
maintain a 20% decrease in gross billings .
A federal government authority required partial or complete closure of your organization throughout 2020 or 2021. This includes your operations being limited by business, failure to take a trip or restrictions of team meetings.
- Gross invoice decrease standards is various for 2020 as well as 2021, however is determined versus the current quarter as compared to 2019 pre-COVID quantities:
- A federal government authority required partial or full shutdown of your company throughout 2020 or 2021. This includes your operations being restricted by business, inability to travel or constraints of group meetings.
- Gross receipt reduction criteria is different for 2020 and also 2021, yet is measured against the existing quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we remained open during the pandemic?
Yes. To qualify, your business should fulfill either among the adhering to criteria:
- Experienced a decrease in gross invoices by 20%, or
- Had to alter service procedures due to federal government orders
Numerous items are considered as adjustments in service operations, including changes in task duties and the purchase of additional protective devices.