How It Works
Even if you don't own an organization, be sure to share this video with service owners you understand, this video might literally be worth 10s of thousands of dollars for them. And if you are a service owner and after you view this video you desire 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 business and your ballpark year-over-year revenue, and let's see if we can get some more cash back in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by decreasing 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.
Because that's the things your CPA need to stress about, I am not going to get into the complexities of that type here or the Form 941 and all the payroll things. In this video I wish to inform you what you require to understand so you can go to your CPA and say, "Hey, what about this employee retention credit, why haven't you informed me about this?" You can be informed and take ownership of your own tax situations, of your organization's tax circumstance to produce more money flow in your business and more wealth for yourself.
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?
Exactly How to Get going
The most effective method is to collaborate with a no-risk, contingency-based cost savings firm. That will discuss in support of their clients to obtain the finest prices possible for their existing clients. They will examine old invoices for mistakes getting their clients reimbursements and tax credits. They can enhance the earnings and also overall valuation of their clients organizations.
Assistance supplied can include:
Committed professionals that will certainly analyze extremely complex program policies and will be readily available to answer your questions, including:
How does the PPP loan factor into the ERC?
What are the distinctions in between the 2020 and also 2021 programs and exactly how does it put on your company?
What are gathering guidelines for bigger, multi-state companies, and also just how do I translate several states executive orders?
How do part-time, Union, and also tipped staff members impact the amount of my reimbursements?
Comprehensive evaluation concerning your eligibility
Comprehensive analysis of your claim
Guidance on the claiming procedure and also documents
Particular program knowledge that a routine certified public accountant or payroll processor might not be well-versed in
Quick and also smooth end-to-end process, from qualification to claiming as well as getting refunds
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All Set To Get Going? Its Simple.
1. Whichever company you pick to work with will identify whether your service qualifies for the ERC.
2. They will certainly examine your case and also calculate the optimum amount you can obtain.
3. Their team guides you through the claiming procedure, from beginning to end, consisting of appropriate documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program started on March 13th, 2020 as well as ends on September 30, 2021, for eligible employers.
You can get refunds for 2020 and also 2021 after December 31st of this year, right into 2022 and also 2023. And possibly past after that also.
Many organizations have received refunds, as well as others, along with refunds, also qualified to continue obtaining ERC in every payroll they refine through December 31, 2021, at close to 30% of their pay-roll expense.
Some companies have actually received reimbursements 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 qualify for the ERC even if they currently obtained a PPP car loan. Note, though, that the ERC will just apply to earnings not made use of for the PPP.
sustain a 20% decline in gross billings .
A government authority called for partial or complete shutdown of your service during 2020 or 2021. This includes your operations being restricted by business, inability to take a trip or constraints of group meetings.
- Gross invoice decrease requirements is different for 2020 as well as 2021, yet is gauged versus the present quarter as compared to 2019 pre-COVID amounts:
- A federal government authority required partial or complete closure of your company throughout 2020 or 2021. This includes your operations being restricted by commerce, lack of ability to take a trip or restrictions of team meetings.
- Gross receipt reduction criteria is various for 2020 as well as 2021, but is gauged versus the existing quarter as contrasted to 2019 pre-COVID amounts.
Do we still certify if we remained open during the pandemic?
Yes. To certify, your service needs to fulfill either one of the complying with criteria:
- Experienced a decrease in gross receipts by 20%, or
- Had to alter business procedures as a result of federal government orders
Lots of things are taken into consideration as changes in business operations, including shifts in task duties and also the purchase of additional safety equipment.