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
Even if you don't own a business, be sure to share this video with service owners you know, this video might literally be worth tens of thousands of dollars for them. And if you are a business owner and after you enjoy 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 email, [email protected], tell me a little about your service and your ballpark year-over-year income, and let's see if we can get some more money back in your pocket due to the fact that you can take this credit versus your payroll taxes you pay by reducing your required 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 kind here or the Form 941 and all the payroll stuff because that's the things your CPA should stress over. In this video I wish to tell you what you need to know 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 notified and take ownership of your own tax situations, of your organization's tax circumstance to generate more cash circulation in your business and more wealth for yourself.
About Employee Retention Ertc Credit
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 absolutely nothing in this video is to be taken as legal or tax recommendations, this video is for basic informational functions just, yes, I am a tax and a cpa expert, but I am not your CPA nor your tax professional unless you have engaged my firm. Another disclaimer here, for functions of this video I am presuming that if you're seeing this you are a small company owner, which for employee retention credit purposes means one hundred or less workers for purposes of the 2020 credit and 5 hundred or less employees for purposes of the 2021 credit, if you have a company with over 5 hundred workers I envision you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small organization owners who may work with a local tax expert who is so neck-deep in income tax return today because the government extended the tax deadline 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 profitable for organization owners in 2021 and why weren't we talking about it in 2020, it's been around given that then, considering that the CARES Act? Yes, the employee retention credit has actually been around because the CARES Act that was passed over a year ago in March 2020, but the employee retention credit didn't get much love last year in 2020 due to the fact that of the PPP, the Paycheck Protection Program.
However the stimulus bill passed in December, the Consolidated Appropriations Act, along with the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it a lot more appealing. Generally the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular woman with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for business owners in 2021. Why? Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act? I'll inform you why, a few reasons.
Why Employee Retention Ertc Credit
Factor, the employee retention credit for both 2020 and 2021 is now available to PPP receivers, however 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 declare the employee retention credit on those salaries. If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to select the finest covered duration that will get you complete PPP forgiveness however also maximize your employee retention credit.
For PPP forgiveness, you desire to fill up that payroll container with as lots of expenses as possible that do not count for employee retention credit functions. For instance, you can't declare the employee retention credit on state unemployment insurance contributions, however state unemployment insurance coverage contributions count toward PPP forgiveness, see? So you 'd wish to dump 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.
So this can get extremely technical really quickly and it's really situation particular in terms of enhancing PPP vs. ERC and my firm has tools to figure this stuff out for you, I'm not going to go into all that here, however just know that you really have to do the mathematics when doing your PPP forgiveness to make certain you're not leaving anything on the table in regards to the employee retention credit. Another thing to note is you can't subtract the salaries you declared the employee retention credit on, which makes sense also, why should the government give you a reduction for these wages that they already gave you a credit for? Essentially the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply love talking about this things, but let's discuss another reason the employee retention credit is more attractive now than it was last year, and that 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 had to show a 50% decrease in gross invoices compared to the same calendar quarter in 2019.
In 2021, for a quarter to certify for the employee retention credit, you only require to reveal a 20% reduction in gross invoices compared to the very same calendar quarter in 2019. This means far more services will certify. My business, for example, experienced a 26% decline in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.
I didn't qualify for the 2020 employee retention credit first, because I got very first round of PPP cash and 2nd because my company didn't suffer that big 50% decrease required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. For 2021, for any quarter, you can elect 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 functions of figuring out eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Implication here is that if you receive Q1 2021 based on Q1 2021's gross receipts, you will also receive Q2 2021 considering that you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so basically if you simply 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 decline in profits, you can qualify for the employee retention credit if you were required to totally or partially suspend operations in your company throughout 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 duration of full or partial shutdown.
Typical example, you own a dining establishment, 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 just are more businesses qualified for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the exact 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, but that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of certified wages per worker paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per worker ... for that whole time period? 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 employee per quarter, so we're talking about a maximum 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 choose the best covered period that will get you complete PPP forgiveness but also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just love talking about this stuff, but 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 much easier to certify for the employee retention credit in 2021. I didn't qualify for the 2020 employee retention credit first, due to the fact that I got first round of PPP money and 2nd since my company didn't suffer that large 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my service qualifies. Not just are more services eligible for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the very same earnings and making more services eligible through the 20% decline threshold rather than the 50% decrease limit, but the 2021 credit is likewise more lucrative than the 2020 credit.
Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of certified wages per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per worker ... for that whole time period?
Exactly How to Get going
That will certainly discuss on part of their customers to get the ideal prices feasible for their existing customers. They will certainly audit old invoices for mistakes obtaining their clients reimbursements and also tax credits.
Solutions offered can include:
Dedicated experts that will interpret very complicated program policies and also will be readily available to answer your questions, including:
Just how does the PPP loan factor right into the ERC?
What are the distinctions between the 2020 and 2021 programs and also just how does it relate to your business?
What are aggregation regulations for larger, multi-state companies, as well as how do I translate numerous states executive orders?
How do part-time, Union, and also tipped staff members influence the amount of my reimbursements?
Extensive examination regarding your qualification
Thorough analysis of your claim
Guidance on the declaring process as well as documents
Specific program experience that a regular CPA or payroll cpu might not be well-versed in
Smooth and quick end-to-end process, from qualification to claiming as well as obtaining reimbursements
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All Set To Get Begun? Its Simple.
1. Whichever firm you pick to work with will certainly identify whether your company qualifies and gets approvel for the ERC.
2. They will examine your case and compute the maximum amount you can obtain.
3. Their group guides you via the declaring procedure, from beginning to finish, including appropriate documentation.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and also finishes on September 30, 2021, for eligible businesses.
You can obtain reimbursements for 2020 as well as 2021 after December 31st of this year, right into 2022 as well as 2023. And also potentially past after that also.
Many services have received refunds, and also others, along with refunds, likewise qualified to proceed obtaining ERC in every payroll they refine through December 31, 2021, at around 30% of their payroll cost.
Some businesses have obtained refunds from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can currently get the ERC even if they already got a PPP loan. Keep in mind, though, that the ERC will just put on incomes not made use of for the PPP.
Do we still accredit if we did not) incur a 20% decrease in gross receipts .
A government authority called for complete or partial closure of your business during 2020 or 2021. This includes your procedures being restricted by commerce, lack of ability to travel or constraints of group meetings.
- Gross invoice decrease criteria is different for 2020 and 2021, yet is measured against the present quarter as compared to 2019 pre-COVID amounts:
- A federal government authority called for partial or complete shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, lack of ability to take a trip or limitations of group meetings.
- Gross invoice reduction standards is various for 2020 and 2021, but is determined against the current quarter as contrasted to 2019 pre-COVID quantities.
Do we still qualify if we continued to be open during the pandemic?
Yes. To qualify, your service should meet either one of the adhering to standards:
- Experienced a decrease in gross receipts by 20%, or
- Had to transform service operations due to federal government orders
Lots of items are thought about as modifications in organization procedures, consisting of shifts in task functions and the purchase of additional safety devices.