Why Employee Retention Credit 2020

Factor, the employee retention credit for both 2020 and 2021 is now available to PPP recipients, but 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 salaries. 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 maximize your employee retention credit.



For PPP forgiveness, you want to fill up that payroll bucket with as many costs as possible that don't count for employee retention credit purposes. You can't claim the employee retention credit on state joblessness insurance coverage contributions, however state joblessness insurance coverage contributions count towards PPP forgiveness, see? So you 'd wish to dispose all your state joblessness insurance contributions on your PPP forgiveness application to leave as much regular 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 deduction for these wages that they currently offered you a credit for? Alright, sorry for getting a little sidetracked there, I simply like talking about this things, however 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 much easier to certify for the employee retention credit in 2021.

In 2021, for a quarter to certify for the employee retention credit, you just require to show a 20% reduction in gross receipts compared to the very same calendar quarter in 2019. This implies far more services will certify. My service, for example, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.

So I didn't certify for the 2020 employee retention credit initially, since I got preliminary of PPP cash and 2nd because my organization didn't suffer that large 50% decrease required to get approved for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. Also, for 2021, for any quarter, you can elect to utilize the lookback quarter, meaning that, for example, even if your Q1 2021 gross invoices 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. Implication here is that if you certify for Q1 2021 based upon Q1 2021's gross invoices, you will likewise certify for Q2 2021 since you certified in the lookback quarter of Q1 2021.

Very same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply certify for Q1 and Q3 2021, you likewise certify for Q2 and Q4 based on the lookback. Also, even if you didn't have a sufficient decrease in income, you can receive the employee retention credit if you were required to fully or partially suspend operations in your business 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 throughout that period of partial or full shutdown.

Common example, you own a dining establishment, and your guv signed an executive order stating that you require to shut down indoor dining. That is an example of a partial shutdown. Not only are more businesses eligible for the employee retention credit thanks to these brand-new laws, making PPP receivers qualified for the employee retention credit though not on the exact same earnings and making more services eligible through the 20% decrease threshold rather than the 50% decrease threshold, however the 2021 credit is also more lucrative 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 employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in salaries per worker ... for that whole time duration? 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 worker per quarter. That's right, folks, the maximum 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 finest covered duration that will get you complete PPP forgiveness but also maximize your employee retention credit.



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 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 business didn't suffer that large 50% decrease needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my service qualifies. Not just are more companies 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 threshold rather than 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 since for 2021, the credit is equivalent to 70% of certified incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in salaries per employee ... for that whole time duration?