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.
Exactly How It Works
This is big, a lot of little business owners don't learn about this, or they've found out about it, however they do not understand much about it, even numerous tax experts do not understand the ins and outs of this thing since it's new and a lot of these modificationsthat are beneficial to company owner occurred in the middle of tax season. In this video I'm going to dig into the employee retention credit, why it's so financially rewarding now in 2021, more profitable, far more financially rewarding, in fact now than it was in 2020, 5x more lucrative at least. Even if you do not own a business, be sure to share this video with organization owners you know, this video might literally be worth tens of thousands of dollars for them. And if you are an entrepreneur and after you see this video you want 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 e-mail, [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 against your payroll taxes you pay by minimizing your needed employment tax deposits or you can ask for an advance payment of the credit using IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
I am not going to get into the intricacies of that kind here or the Form 941 and all the payroll stuff since that's the stuff your CPA need to worry 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 have not you informed me about this?" so you can be notified and take ownership of your own tax situations, of your organization's tax scenario to generate more capital in your business and more wealth for yourself.
About Employee Retention 2021 Ertc 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, prior to I get into this, I desire to say that nothing in this video is to be taken as legal or tax suggestions, this video is for general educational functions 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 functions of this video I am presuming that if you're viewing this you are a little business owner, which for employee retention credit functions suggests one hundred or fewer staff members for purposes of the 2020 credit and five hundred or fewer staff members for functions of the 2021 credit, if you have a company with over 5 hundred staff members I imagine 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 deal with a local tax expert who is so neck-deep in tax returns today since the government extended the tax due date to May 17 or volume is just the nature of their business that your tax expert hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so lucrative for service owners in 2021 and why weren't we talking about it in 2020, it's been around because then, since 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, however the employee retention credit didn't get much love last year in 2020 since of the PPP, the Paycheck Protection Program.
The stimulus bill passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made changes to the ERC making it much more appealing. Essentially the employee retention credit had a glow-up in between 2020 and 2021, it went from the nerdy woman with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for company owners 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 tell you why, a couple of reasons.
Why Employee Retention 2021 Ertc Qualifications
Factor, the employee retention credit for both 2020 and 2021 is now offered to PPP recipients, 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 claim the employee retention credit on those wages. 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 finest covered duration that will get you complete PPP forgiveness but also maximize your employee retention credit.
Likewise, for PPP forgiveness, you wish to fill that payroll container with as numerous costs as possible that do not count for employee retention credit purposes. You can't declare the employee retention credit on state unemployment insurance contributions, however state unemployment insurance coverage contributions count towards PPP forgiveness, see? You 'd desire to dump all your state joblessness insurance contributions on your PPP forgiveness application to leave as much regular earnings as possible to take the employee retention credit on.
So this can get very technical very fast and it's extremely scenario specific in regards to optimizing PPP vs. ERC and my company has tools to figure this things out for you, I'm not going to dig into all that here, however feel in one's bones that you truly have to do the mathematics when doing your PPP forgiveness to ensure you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't deduct the salaries you claimed the employee retention credit on, which makes good sense as well, why should the federal government give you a reduction for these wages that they already gave you a credit for? Basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I just enjoy talking about this stuff, but let's discuss another reason that the employee retention credit is more attractive now than it was last year, which is that it's 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 reveal a 50% decrease in gross receipts compared to the exact same calendar quarter in 2019.
However in 2021, for a quarter to receive the employee retention credit, you only need to reveal a 20% decline in gross receipts compared to the exact same calendar quarter in 2019. So this means much more services will certify. My business, for example, experienced a 26% decline in gross receipts, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.
So I didn't get approved for the 2020 employee retention credit initially, because I got preliminary of PPP cash and 2nd because my organization didn't suffer that big 50% decline needed to receive the employee retention credit last year.But for 2021, at least for Q1, yeah, my business certifies. Likewise, for 2021, for any quarter, you can elect to use the lookback quarter, meaning that, for example, even if your Q1 2021 gross invoices aren't a minimum of 20% lower than your Q1 2019 gross invoices, you can compare for purposes of determining 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 invoices, you will likewise receive Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just qualify for Q1 and Q3 2021, you likewise certify for Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decline in revenue, you can qualify for the employee retention credit if you were needed to fully 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 eligible for the employee retention credit during that duration of partial or full shutdown.
Common example, you own a restaurant, and your guv signed an executive order stating that you require 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 very same wages and making more organizations eligible through the 20% decline limit rather than the 50% decrease threshold, however the 2021 credit is also more rewarding than the 2020 credit.
This is due to the fact that for 2020, the employee retention credit amounted to 50% of all qualified earnings for 2020, the employee retention credit amounted to 50% of all qualified incomes you paid workers in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in incomes for that whole time period. The optimum 2020 credit per staff member was $5,000. Okay, but that's nothing compared to the 2021 credit since for 2021, the credit amounts to 70% of qualified salaries per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that whole 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 incomes per employee per quarter, so we're discussing a maximum credit of $7,000 per employee per quarter. $7,000 times four is $28,000 if you're eligible all 4 quarters. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker. That's big. That's a blessing to numerous organization owners right now. So you see what I mean now, right, how the employee retention credit has gone from unsightly duckling in 2020 to beautiful swan in 2021, right? And by the way, by the method, qualified earnings consists of 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 need to pick the best 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 love talking about this things, 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 easier to qualify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit first, because I got first round of PPP money and second because my service didn't suffer that large 50% decrease needed to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. 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 same wages and making more organizations eligible through the 20% decline threshold rather than the 50% decrease limit, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of qualified salaries per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per staff member ... for that whole time duration?
Just How to Start
That will certainly bargain on part of their clients to get the ideal costs feasible for their existing clients. They will examine old billings for errors getting their clients refunds and credits.
Assistance supplied can include:
Devoted professionals that will certainly interpret extremely complicated program rules as well as will certainly be offered to address your inquiries, including:
Exactly how does the PPP loan variable right into the ERC?
What are the differences between the 2020 and 2021 programs and also how does it put on your business?
What are gathering guidelines for larger, multi-state companies, and also just how do I translate multiple states executive orders?
Just how do part-time, Union, and tipped employees affect the quantity of my reimbursements?
Thorough analysis regarding your qualification
Thorough evaluation of your claim
Guidance on the declaring procedure and documents
Specific program knowledge that a normal CPA or payroll processor might not be well-versed in
Smooth as well as rapid end-to-end procedure, from eligibility to claiming and obtaining refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Prepared To Start? Its Simple.
1. Whichever company you pick to work with will identify whether your company certifies and gets approvel for the ERC.
2. They will certainly examine your case and also calculate the optimum amount you can get.
3. Their team overviews you with the declaring process, from beginning to end, consisting of proper documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 and also right on September 30, 2021, for qualified organizations.
You can apply for refunds for 2020 and also 2021 after December 31st of this year, right into 2022 and 2023. And also possibly beyond then too.
Many services have received refunds, and also others, along with reimbursements, also certified to proceed obtaining ERC in every payroll they process through December 31, 2021, at about 30% of their pay-roll expense.
Some organizations have received refunds from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can currently receive the ERC also if they currently got a PPP financing. Keep in mind, however, that the ERC will just relate to salaries not made use of for the PPP.
maintain a 20% decline in gross receipts .
A government authority required complete or partial shutdown of your service during 2020 or 2021. This includes your procedures being limited by commerce, failure to travel or restrictions of team conferences.
- Gross receipt decrease standards is various for 2020 as well as 2021, but is gauged against the present quarter as contrasted to 2019 pre-COVID amounts:
- A government authority needed complete or partial closure of your company throughout 2020 or 2021. This includes your operations being restricted by business, failure to take a trip or restrictions of team conferences.
- Gross receipt decrease requirements is various for 2020 and 2021, however is measured versus the present quarter as compared to 2019 pre-COVID amounts.
Do we still qualify if we remained open during the pandemic?
Yes. To qualify, your organization must meet either one of the complying with standards:
- Experienced a decrease in gross receipts by 20%, or
- Had to transform organization operations due to government orders
Numerous products are thought about as modifications in business procedures, consisting of shifts in task roles and the acquisition of added safety tools.