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 Functions
This is big, a great deal of small company owners don't know about this, or they've become aware of it, however they do not know much about it, even lots of tax experts do not understand the ins and outs of this thing since it's new and a lot of these changesthat are advantageous to entrepreneur happened 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 lucrative, in reality now than it was in 2020, 5x more lucrative at least. Even if you don't own an organization, 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 a service owner and after you watch 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 company and your ballpark year-over-year revenue, and let's see if we can get some more money back in your pocket since you can take this credit against your payroll taxes you pay by reducing your required employment tax deposits or you can request an advance payment of the credit using IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Because that's the things your CPA need to stress about, I am not going to get into the complexities of that form here or the Form 941 and all the payroll stuff. In this video I desire to tell you what you need to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why haven't you told me about this?" so you can be informed and take ownership of your own tax situations, of your company's tax scenario to generate more capital in your business and more wealth on your own.
About Employee Retention Credit 2021
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 want to say that nothing in this video is to be taken as legal or tax recommendations, this video is for basic informational functions only, yes, I am a CPA and a tax professional, however I am not your CPA nor your tax expert unless you have actually engaged my company. Another disclaimer here, for purposes of this video I am assuming that if you're viewing this you are a small organization owner, which for employee retention credit functions suggests one hundred or less staff members for purposes of the 2020 credit and five hundred or less staff members for functions of the 2021 credit, if you have a business with over five hundred workers I imagine you have in-house counsel, in-house CPAs who are on top of this things, but I'm here for you little company owners who might deal with a regional tax expert who is so neck-deep in income tax return right now due to the fact that the government extended the tax deadline to May 17 or volume is just the nature of their company 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 rewarding for business owners in 2021 and why weren't we speaking about it in 2020, it's been around given that then, 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 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 in 2015 in 2020 because of the PPP, the Paycheck Protection Program. Initially, in 2020, if you got a PPP loan as an employer, you were not eligible 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 unkempt 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 appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Credit 2021
Factor, the employee retention credit for both 2020 and 2021 is now offered to PPP receivers, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your staff members and after that reverse and declare the employee retention credit on those earnings as well. The government does not look too fondly on paying your payroll for you through the PPP and after that you claiming a credit versus the taxes you pay the federal government on those salaries that the government paid for you. That makes 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 best covered period that will get you full PPP forgiveness however likewise optimize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll container with as many costs as possible that do not count for employee retention credit purposes. For instance, you can't declare the employee retention credit on state unemployment insurance contributions, however state joblessness insurance contributions count towards PPP forgiveness, see? You 'd desire to dispose all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much normal wages as possible to take the employee retention credit on.
Another thing to note is you can't subtract the wages you claimed the employee retention credit on, and that makes sense as well, why should the government provide you a reduction for these wages that they already provided you a credit for? Alright, sorry for getting a little sidetracked there, I simply love talking about this things, 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 certify for the employee retention credit in 2021.
In 2021, for a quarter to qualify for the employee retention credit, you just need to reveal a 20% reduction in gross invoices compared to the same calendar quarter in 2019. This means far more companies will certify. My organization, for instance, 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 qualify for the 2020 employee retention credit initially, since I got preliminary of PPP money and 2nd because my organization didn't suffer that big 50% decline needed to get approved for the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my organization certifies. Likewise, for 2021, for any quarter, you can elect to utilize the lookback quarter, indicating 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 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 qualify for Q1 2021 based upon Q1 2021's gross invoices, you will also certify for Q2 2021 because you qualified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so essentially if you just get approved for Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based upon the lookback. Also, even if you didn't have an adequate decline in revenue, you can receive the employee retention credit if you were needed 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 eligible for the employee retention credit during that period of partial or full shutdown.
Typical example, you own a restaurant, and your governor signed an executive order stating that you need to shut down indoor dining. That is an example of a partial shutdown. Likewise, not just are more services eligible for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the same earnings and making more businesses eligible through the 20% decline limit instead of the 50% decrease threshold, but the 2021 credit is likewise more rewarding than the 2020 credit.
This is since for 2020, the employee retention credit amounted to 50% of all qualified wages for 2020, the employee retention credit was equal to 50% of all certified wages you paid workers between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in wages for that whole time duration. So the maximum 2020 credit per worker was $5,000. Okay, but that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit amounts to 70% of certified salaries per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that whole time duration? No. Per quarter. For 2021 the portion 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 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 maximum 2021 employee retention credit is $28,000 per employee. That's substantial. That's a blessing to many company owner right now. You see what I indicate now, right, how the employee retention credit has gone from ugly duckling in 2020 to gorgeous swan in 2021? And by the method, by the method, qualified incomes includes employer-paid health insurance premiums.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you need to choose the best covered period that will get you full PPP forgiveness however likewise maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just enjoy talking about this things, however 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 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 cash and 2nd due to the fact that my organization didn't suffer that large 50% decrease required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. Not only are more companies eligible for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the same earnings and making more businesses eligible through the 20% decrease threshold rather than the 50% decline threshold, but the 2021 credit is also more profitable 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 incomes per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that whole time period?
Exactly How to Start
That will discuss on behalf of their customers to obtain the best costs possible for their existing clients. They will certainly investigate old billings for errors obtaining their clients refunds and also tax credits.
Solutions offered can include:
Committed professionals that will analyze very complicated program policies and also will be offered to answer your inquiries, including:
Exactly how does the PPP funding aspect into the ERC?
What are the distinctions between the 2020 as well as 2021 programs and also exactly how does it put on your company?
What are aggregation rules for bigger, multi-state companies, and also just how do I translate numerous states executive orders?
Exactly how do part-time, Union, and also tipped employees affect the amount of my reimbursements?
Thorough examination concerning your eligibility
Thorough analysis of your case
Guidance on the declaring procedure and also documents
Particular program knowledge that a normal certified public accountant or payroll processor could not be well-versed in
Smooth and fast end-to-end process, from eligibility to declaring 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
Prepared To Start? Its Simple.
1. Whichever company you pick to work with will figure out whether your service qualifies and gets approvel for the ERC.
2. They will certainly evaluate your claim as well as compute the maximum quantity you can receive.
3. Their team guides you via the asserting procedure, from starting to end, consisting of proper documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 and also right on September 30, 2021, for eligible organizations.
You can look for reimbursements for 2020 and 2021 after December 31st of this year, into 2022 and also 2023. And possibly beyond after that also.
Many companies have received refunds, and others, along with refunds, additionally certified to continue getting ERC in every pay-roll they process through December 31, 2021, at close to 30% of their payroll expense.
Some organizations have actually obtained reimbursements from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, services can now receive the ERC even if they currently obtained a PPP loan. Keep in mind, however, that the ERC will only use to salaries not made use of for the PPP.
sustain a 20% reduction in gross invoices .
A government authority required partial or full closure of your service during 2020 or 2021. This includes your operations being limited by commerce, failure to travel or restrictions of team meetings.
- Gross receipt reduction standards is various for 2020 as well as 2021, but is measured versus the current quarter as compared to 2019 pre-COVID quantities:
- A federal government authority required complete or partial closure of your organization throughout 2020 or 2021. This includes your operations being limited by business, lack of ability to travel or restrictions of team meetings.
- Gross receipt reduction criteria is various for 2020 and also 2021, yet is gauged against the existing quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we continued to be open throughout the pandemic?
Yes. To certify, your service has to meet either one of the complying with standards:
- Experienced a decrease in gross receipts by 20%, or
- Needed to change business operations as a result of government orders
Lots of things are thought about as modifications in service operations, consisting of shifts in job functions as well as the acquisition of extra protective equipment.