Exactly How It Works
Even if you don't own an organization, be sure to share this video with organization owners you know, this video could actually be worth 10s of thousands of dollars for them. And if you are an organization owner and after you see this video you desire 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 email, [email protected], inform 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 since you can take this credit against your payroll taxes you pay by reducing your needed 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 complexities of that form here or the Form 941 and all the payroll things since that's the stuff your CPA need to stress over. In this video I wish to inform you what you need to know so you can go to your CPA and say, "Hey, what about this employee retention credit, why have not you told me about this?" You can be notified and take ownership of your own tax situations, of your organization's tax scenario to create more money flow in your organization and more wealth for yourself.
Why Employee Retention Credit Eligibility
Factor, the employee retention credit for both 2020 and 2021 is now readily 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 staff members and then turn around and declare the employee retention credit on those wages. 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 finest covered period that will get you full PPP forgiveness but also optimize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll bucket with as lots of expenses as possible that don't count for employee retention credit functions. For instance, you can't declare the employee retention credit on state joblessness insurance contributions, however state unemployment insurance contributions count toward PPP forgiveness, see? So you 'd want to dispose all your state joblessness insurance coverage contributions on your PPP forgiveness application to leave as much common salaries as possible to take the employee retention credit on.
Another thing to note is you can't deduct the incomes you claimed the employee retention credit on, and that makes sense as well, why should the federal government provide you a deduction for these earnings that they already offered you a credit for? Alright, sorry for getting a little sidetracked there, I just like 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 much easier to qualify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you just need to reveal a 20% decrease in gross receipts compared to the same calendar quarter in 2019. This implies far more businesses 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 last year too.
I didn't qualify for the 2020 employee retention credit initially, due to the fact that I got very first round of PPP cash and 2nd since my business 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 service certifies. For 2021, for any quarter, you can choose to utilize the lookback quarter, meaning that, for example, even if your Q1 2021 gross receipts aren't at least 20% lower than your Q1 2019 gross receipts, you can compare for purposes of determining 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 on Q1 2021's gross receipts, you will also get approved for Q2 2021 considering that you qualified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so generally if you just get approved for Q1 and Q3 2021, you likewise get approved for Q2 and Q4 based on the lookback. Even if you didn't have an enough decrease in income, you can certify for the employee retention credit if you were needed to completely 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 duration of full or partial shutdown.
Common 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. Not only are more businesses qualified for the employee retention credit thanks to these brand-new laws, making PPP recipients qualified for the employee retention credit though not on the same salaries and making more services eligible through the 20% decline threshold rather than the 50% decrease threshold, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit because for 2021, the credit is equal to 70% of qualified wages per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that entire time period? For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in salaries per worker per quarter, so we're talking about an optimum credit of $7,000 per staff member per quarter. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to pick the finest covered period that will get you full PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just enjoy talking about this stuff, however let's talk about another factor why the employee retention credit is more appealing now than it was last year, and that is that it's simpler to certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit first, because I got very first round of PPP cash and second because my organization 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 organizations eligible 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 wages and making more services eligible through the 20% decrease limit rather than the 50% decline limit, but the 2021 credit is also more rewarding than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit because for 2021, the credit is equivalent to 70% of qualified incomes per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per staff member ... for that entire time period?
Exactly How to Get going
That will certainly bargain on part of their clients to get the ideal prices feasible for their existing clients. They will audit old billings for mistakes getting their customers refunds and tax credits.
Assistance provided can include:
Dedicated professionals that will analyze highly intricate program guidelines as well as will certainly be readily available to answer your questions, including:
How does the PPP finance element right into the ERC?
What are the distinctions between the 2020 and also 2021 programs as well as exactly how does it relate to your organization?
What are gathering rules for bigger, multi-state companies, and just how do I interpret numerous states executive orders?
Just how do part-time, Union, and tipped workers affect the amount of my refunds?
Thorough evaluation regarding your qualification
Extensive evaluation of your situation
Advice on the claiming procedure and documentation
Details program experience that a normal CPA or payroll cpu may not be well-versed in
Quick as well as smooth end-to-end process, from eligibility to asserting as well as getting refunds
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
All Set To Get Going? Its Simple.
1. Whichever firm you pick to work with will certainly identify whether your company certifies and gets approvel for the ERC.
2. They will analyze your request and also calculate the maximum quantity you can receive.
3. Their team overviews you via the claiming procedure, from starting to finish, including correct documents.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and right on September 30, 2021, for qualified organizations.
You can obtain reimbursements for 2020 and 2021 after December 31st of this year, right into 2022 and also 2023. And also possibly beyond after that as well.
Many businesses have received refunds, as well as others, in addition to refunds, additionally qualified to continue receiving ERC in every pay-roll they refine through December 31, 2021, at close to 30% of their pay-roll expense.
Some services have obtained reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, businesses can now get the ERC also if they currently got a PPP financing. Note, though, that the ERC will just use to salaries not made use of for the PPP.
Do we still certify if we did not sustain a 20% reduction in gross billings .
A federal government authority required full or partial closure of your service throughout 2020 or 2021. This includes your procedures being limited by commerce, failure to travel or constraints of group conferences.
- Gross receipt reduction standards is various for 2020 as well as 2021, but is gauged versus the current quarter as compared to 2019 pre-COVID quantities:
- A federal government authority needed complete or partial closure of your business throughout 2020 or 2021. This includes your procedures being restricted by business, failure to take a trip or restrictions of group conferences.
- Gross receipt decrease criteria is various for 2020 and also 2021, however is gauged against the current quarter as contrasted to 2019 pre-COVID amounts.
Do we still certify if we stayed open during the pandemic?
Yes. To qualify, your business must satisfy either among the adhering to criteria:
- Experienced a decrease in gross receipts by 20%, or
- Needed to change company procedures as a result of federal government orders
Lots of products are thought about as adjustments in service procedures, including shifts in job duties and also the purchase of extra protective equipment.