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 great deal of small company owners do not understand about this, or they've heard about it, however they do not understand much about it, even numerous tax experts don't know the ins and outs of this thing due to the fact that it's new and a lot of these changesthat are helpful to entrepreneur 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 lucrative, much more rewarding, in reality now than it remained in 2020, 5x more lucrative at least. Even if you do not own an organization, be sure to share this video with service owners you understand, this video could literally be worth 10s of thousands of dollars for them. And if you are an entrepreneur and after you watch this video you want 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], tell me a little about your service and your ballpark year-over-year earnings, and let's see if we can get some more refund in your pocket since you can take this credit against your payroll taxes you pay by minimizing your required 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.
I am not going to get into the intricacies of that form here or the Form 941 and all the payroll stuff because that's the stuff your CPA should fret about. In this video I desire 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 haven't you told me about this?" You can be informed and take ownership of your own tax scenarios, of your company's tax scenario to produce more money circulation in your business and more wealth for yourself.
About Employee Retention 2021 Erc Calculation
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, before I get into this, I desire to say that absolutely nothing in this video is to be taken as legal or tax guidance, this video is for general informational functions just, yes, I am a CPA and a tax expert, but I am not your CPA nor your tax professional unless you have actually engaged my company as such. Another disclaimer here, for functions of this video I am presuming that if you're enjoying this you are a small company owner, which for employee retention credit functions suggests one hundred or less employees for purposes of the 2020 credit and five hundred or fewer workers for functions of the 2021 credit, if you have a business with over five hundred staff members I envision you have in-house counsel, in-house CPAs who are on top of this things, but I'm here for you small service owners who might deal with a local tax specialist 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 entrepreneur in 2021 and why weren't we discussing 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 actually 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 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 in between 2020 and 2021, it went from the unpopular woman with thick glasses and unkempt eyebrows and her hair up in 2020 to the belle of the ball for service 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 2021 Erc Calculation
Factor, the employee retention credit for both 2020 and 2021 is now available to PPP receivers, however 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 earnings. 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 optimize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as lots of costs as possible that don't count for employee retention credit purposes. 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? You 'd desire to discard all your state unemployment insurance coverage contributions on your PPP forgiveness application to leave as much common earnings as possible to take the employee retention credit on.
Another thing to note is you can't subtract the incomes you declared the employee retention credit on, and that makes sense as well, why should the government give you a deduction for these salaries that they already provided you a credit for? Alright, sorry for getting a little sidetracked there, I simply enjoy talking about this things, but let's talk about another factor 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 2021, for a quarter to qualify for the employee retention credit, you just need to show a 20% decline in gross invoices compared to the exact same calendar quarter in 2019. This implies far more businesses will certify. My company, for instance, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
So I didn't get approved for the 2020 employee retention credit first, due to the fact that I got first round of PPP money and second 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, a minimum of for Q1, yeah, my service qualifies. For 2021, for any quarter, you can elect to utilize the lookback quarter, suggesting 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 certify for Q1 2021 based upon Q1 2021's gross receipts, you will likewise receive Q2 2021 because you qualified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so basically if you just certify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Even if you didn't have an enough decline in earnings, you can certify for the employee retention credit if you were needed to fully 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 during that period of complete or partial shutdown.
Common example, you own a dining establishment, and your governor signed an executive order stating that you require to shut down indoor dining. That is an example of a partial shutdown. Likewise, not just are more organizations 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 incomes and making more organizations eligible through the 20% decline limit instead of the 50% decline threshold, but the 2021 credit is likewise more financially rewarding than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of certified incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per worker ... for that entire time period? For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in incomes per staff member per quarter, so we're talking about an optimum credit of $7,000 per employee per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per employee.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to select the best covered period that will get you full PPP forgiveness but also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this stuff, 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 much easier to qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit initially, because I got very first round of PPP cash and second because my business 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 business qualifies. Not only are more companies 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 very same wages and making more services 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 absolutely nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of certified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in earnings per staff member ... for that whole time period?
Exactly How to Begin
That will work out on behalf of their clients to get the finest rates possible for their existing customers. They will certainly audit old billings for errors obtaining their customers reimbursements and also tax credits.
Assistance offered can include:
Committed experts that will certainly interpret very complex program policies as well as will certainly be available to address your concerns, including:
How does the PPP financing element into the ERC?
What are the differences in between the 2020 as well as 2021 programs and also just how does it relate to your organization?
What are aggregation guidelines for bigger, multi-state employers, as well as exactly how do I interpret multiple states executive orders?
Exactly how do part-time, Union, as well as tipped workers affect the quantity of my refunds?
Thorough evaluation regarding your qualification
Thorough evaluation of your claim
Support on the declaring process and paperwork
Certain program experience that a routine CPA or pay-roll cpu could not be well-versed in
Smooth as well as quick end-to-end process, from eligibility to declaring as well as obtaining reimbursements
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Ready To Get Going? Its Simple.
1. Whichever business you pick to work with will identify whether your organization qualifies and gets approvel for the ERC.
2. They will certainly assess your claim and calculate the optimum amount you can receive.
3. Their team guides you with the asserting procedure, from beginning to end, consisting of appropriate documents.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 and also ends on September 30, 2021, for eligible businesses.
You can look for refunds for 2020 as well as 2021 after December 31st of this year, right into 2022 as well as 2023. As well as potentially beyond after that as well.
Many services have received refunds, as well as others, along with refunds, also qualified to proceed receiving ERC in every pay-roll they process to December 31, 2021, at about 30% of their pay-roll cost.
Some businesses have actually gotten reimbursements 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 get the ERC even if they currently obtained a PPP lending. Keep in mind, however, that the ERC will only relate to earnings not utilized for the PPP.
Do we still certify if we did not incur a 20% decline in gross invoices .
A government authority required partial or full closure of your business throughout 2020 or 2021. This includes your procedures being limited by business, failure to take a trip or limitations of group conferences.
- Gross receipt decrease criteria is various for 2020 and 2021, but is measured against the existing quarter as compared to 2019 pre-COVID quantities:
- A government authority needed complete or partial shutdown of your company throughout 2020 or 2021. This includes your operations being restricted by business, inability to travel or limitations of group meetings.
- Gross invoice decrease criteria is various for 2020 as well as 2021, yet is gauged against the present quarter as contrasted to 2019 pre-COVID amounts.
Do we still qualify if we stayed open throughout the pandemic?
Yes. To certify, your service needs to meet either among the following standards:
- Experienced a decline in gross invoices by 20%, or
- Needed to transform organization procedures as a result of government orders
Several products are considered as adjustments in company operations, including changes in work roles and the purchase of additional safety equipment.