
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 Functions
This is huge, a lot of small company owners do not understand about this, or they've heard about it, but they don't understand much about it, even numerous tax professionals don't know the ins and outs of this thing since it's new and a great deal of these changes
that are helpful to business owners occurred in the middle of tax season. In this video I'm going to dig into the employee retention credit, why it's so rewarding now in 2021, more rewarding, far more rewarding, in truth now than it was in 2020, 5x more lucrative at least. So even if you do not own a company, make sure to share this video with company owner you know, this video could literally deserve 10s of countless dollars for them. And if you are a service owner and after you view this video you wish to talk with me and a member of my team, who will also be either a CPA like myself or an EA, shoot me an e-mail, [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 refund in your pocket due to the fact that you can take this credit against your payroll taxes you pay by decreasing 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.
I am not going to get into the intricacies of that type here or the Form 941 and all the payroll stuff since that's the things your CPA must fret about. In this video I wish to inform you what you need to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why haven't you told me about this?" so you can be notified and take ownership of your own tax scenarios, of your service's tax situation to produce more capital in your service and more wealth on your own.

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About Employee Retention Tax Credit And Ppp
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 say that absolutely nothing in this video is to be taken as legal or tax advice, this video is for general informational functions just, yes, I am a CPA and a tax professional, but I am not your CPA nor your tax professional unless you have engaged my company. 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 purposes means one hundred or less staff members for functions of the 2020 credit and five hundred or less workers for purposes of the 2021 credit, if you have a company with over 5 hundred workers 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 might work with a regional tax professional who is so neck-deep in tax returns right now since the government extended the tax due date 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.
Employee retention credit, why is it so lucrative for company owners in 2021 and why weren't we talking about it in 2020, it's been around given that then, because the CARES Act? Yes, the employee retention credit has 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 since of the PPP, the Paycheck Protection Program.
The stimulus expense passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it much more attractive. So generally the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular girl with thick glasses and unkempt eyebrows and her hair up in 2020 to the belle of the ball for entrepreneur in 2021. Why? Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a couple of reasons.
Why Employee Retention Tax Credit And Ppp
Very first factor, the employee retention credit for both 2020 and 2021 is now offered to PPP receivers, but naturally you can't double dip. You can't get PPP for the hundred thousand dollars you paid your employees and after that reverse and declare the employee retention credit on those earnings as well. 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 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 require to choose the finest covered duration that will get you complete PPP forgiveness but likewise maximize your employee retention credit.
Also, for PPP forgiveness, you want to fill up that payroll pail with as many costs as possible that do not count for employee retention credit functions. 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 dispose all your state unemployment insurance contributions on your PPP forgiveness application to leave as much normal earnings as possible to take the employee retention credit on.
This can get very technical extremely fast and it's really circumstance specific in terms of enhancing PPP vs. ERC and my firm has tools to figure this things out for you, I'm not going to dig into all that here, but simply understand that you actually 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 subtract the wages you claimed the employee retention credit on, and that makes good sense also, why should the federal government offer you a reduction for these earnings that they currently gave you a credit for? Essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply like talking about this stuff, but let's speak about another reason why the employee retention credit is more attractive now than it was in 2015, which is that it's simpler to certify for 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 very same calendar quarter in 2019.
In 2021, for a quarter to qualify for the employee retention credit, you only need to reveal a 20% reduction in gross receipts compared to the very same calendar quarter in 2019. This indicates far more organizations will qualify. My service, for instance, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story in 2015 too.
I didn't certify for the 2020 employee retention credit initially, due to the fact that I got very first round of PPP cash and 2nd due to the fact that my service didn't suffer that large 50% decline required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. Also, for 2021, for any quarter, you can elect to use the lookback quarter, implying that, for example, even if your Q1 2021 gross invoices aren't at least 20% lower than your Q1 2019 gross receipts, 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 on Q1 2021's gross receipts, you will also get approved for Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply certify for Q1 and Q3 2021, you also receive Q2 and Q4 based on the lookback. Also, even if you didn't have an enough decline in profits, you can qualify for the employee retention credit if you were needed to fully 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 during that duration of partial or complete shutdown.
Common example, you own a restaurant, and your governor signed an executive order stating that you need to close down indoor dining. That is an example of a partial shutdown. Not just are more businesses qualified for the employee retention credit thanks to these brand-new laws, making PPP receivers eligible for the employee retention credit though not on the exact same salaries and making more companies eligible through the 20% decline limit rather than the 50% decline limit, however the 2021 credit is also more lucrative than the 2020 credit.
This is since for 2020, the employee retention credit was equal to 50% of all certified incomes for 2020, the employee retention credit was equal to 50% of all qualified salaries you paid staff members in between March 12, 2020, and December 31, 2020, with a limit of $10,000 in incomes for that whole period. The maximum 2020 credit per staff member was $5,000. Okay, however that's nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of certified incomes per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per staff member ... for that whole time period? No. Per quarter. So for 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on approximately $10,000 in salaries per staff member per quarter, so we're talking about an optimum credit of $7,000 per worker per quarter. If you're eligible all 4 quarters, $7,000 times four is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's substantial. That's a godsend to many company owner right now. You see what I indicate now, right, how the employee retention credit has gone from awful duckling in 2020 to stunning swan in 2021? And by the method, by the way, qualified 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 choose the finest covered duration that will get you full PPP forgiveness but likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply enjoy 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 simpler to qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, due to the fact that I got first round of PPP cash and second since my company didn't suffer that big 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company certifies. Not only are more companies qualified for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the exact same earnings and making more companies eligible through the 20% decrease limit rather than the 50% decrease limit, but the 2021 credit is likewise more rewarding 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 qualified earnings per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that whole time duration?
Just How to Start
The very best way is to collaborate with a no-risk, contingency-based price savings firm. That will bargain on part of their customers to get the very best costs possible for their existing customers. They will investigate old billings for errors getting their clients refunds and also tax credits. They can increase the productivity and general assessment of their customers organizations.
Services offered can include:
Committed specialists that will certainly translate highly intricate program regulations and also will certainly be readily available to answer your concerns, including:
Exactly how does the PPP financing element into the ERC?
What are the differences in between the 2020 and 2021 programs and exactly how does it put on your service?
What are gathering rules for bigger, multi-state companies, and exactly how do I translate several states executive orders?
Just how do part-time, Union, and tipped staff members impact the quantity of my refunds?
Complete assessment regarding your eligibility
Thorough analysis of your case
Support on the claiming procedure and documents
Certain program knowledge that a regular CPA or payroll cpu could not be well-versed in
Quick as well as smooth end-to-end process, from eligibility to asserting as well as getting reimbursements
Adams Brown Strategic Allies and CPAs https://www.adamsbrowncpa.com/ertc-tax-credit-consulting-new-york/ |
Finance Pro Plus https://www.financeproplus.com/ |
Bottom Line Concepts https://erc.bottomlinesavings.com/ |
Equifax Workforce Solutions https://workforce.equifax.com/solutions/employee-retention-credit |
Valiant Capital https://erc.valiant-capital.com/ |
NYC Business https://www1.nyc.gov/nycbusiness/article/nyc-employee-retention-grant-program |
Omega Funding solutions https://www.omegafundingsolutions.com/ |
Disisaster Loan Advisors https://www.disasterloanadvisors.com/ |
ERTC Filing https://info.ertcfiling.com/employee-retention-tax-credit-new-york-11368/ |
All Set To Start? Its Simple.
1. Whichever firm you pick to work with will establish whether your service qualifies for the ERC.
2. They will certainly analyze your case and also compute the optimum amount you can receive.
3. Their team overviews you via the declaring process, from starting to finish, including proper paperwork.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 and also right on September 30, 2021, for eligible companies.
You can get reimbursements for 2020 and also 2021 after December 31st of this year, right into 2022 and 2023. As well as possibly beyond then too.
Many companies have received refunds, and also others, in enhancement to reimbursements, additionally qualified to continue getting ERC in every pay-roll they process through December 31, 2021, at around 30% of their pay-roll expense.
Some businesses have actually received reimbursements from $100,000 to $6 million.
Do we still certify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, organizations can now get approved for the ERC even if they currently received a PPP financing. Note, however, that the ERC will just put on earnings not used for the PPP.
sustain a 20% decline in gross invoices .
A government authority needed complete or partial closure of your business throughout 2020 or 2021. This includes your operations being limited by commerce, lack of ability to travel or restrictions of team meetings.
- Gross receipt decrease criteria is various for 2020 and 2021, however is determined against the existing quarter as compared to 2019 pre-COVID quantities:
- A federal government authority called for complete or partial shutdown of your service throughout 2020 or 2021. This includes your procedures being limited by commerce, lack of ability to travel or limitations of team conferences.
- Gross receipt reduction criteria is various for 2020 and 2021, however is measured against the existing quarter as compared to 2019 pre-COVID quantities.
Do we still qualify if we remained open during the pandemic?
Yes. To certify, your organization has to fulfill either among the adhering to standards:
- Experienced a decrease in gross receipts by 20%, or
- Had to alter company procedures because of government orders
Several items are thought about as modifications in organization procedures, including changes in task duties and also the acquisition of added safety equipment.