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.
Just how It Works
Even if you don't own an organization, be sure to share this video with organization owners you understand, this video might actually be worth 10s of thousands of dollars for them. And if you are an organization owner and after you watch 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], inform me a little about your service and your ballpark year-over-year profits, and let's see if we can get some more money back in your pocket because you can take this credit against your payroll taxes you pay by decreasing your needed 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.
I am not going to get into the intricacies of that type here or the Form 941 and all the payroll things since that's the things your CPA should fret about. In this video I wish to tell you what you need to understand so you can go to your CPA and state, "Hey, what about this employee retention credit, why haven't you told me about this?" You can be notified and take ownership of your own tax situations, of your company's tax circumstance to generate more money circulation in your company and more wealth for yourself.
About Employee Retention 2021 Erc Calculation
Alright, now let's go into this and let's speak about the employee retention credit or the ERC as some folks like to call it, before I get into this, I wish to say that nothing in this video is to be taken as legal or tax suggestions, this video is for basic informative purposes only, yes, I am a tax and a certified public accountant expert, but I am not your CPA nor your tax professional unless you have engaged my firm as such. Another disclaimer here, for purposes of this video I am presuming that if you're enjoying this you are a small company owner, which for employee retention credit functions indicates one hundred or less employees for functions of the 2020 credit and 5 hundred or fewer employees for purposes 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 small organization owners who may deal with a regional tax specialist who is so neck-deep in tax returns today because the federal government extended the tax due date to May 17 or volume is just the nature of their company 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 lucrative for business owners in 2021 and why weren't we talking about it in 2020, it's been around because 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 given that 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 a company, you were not eligible for the employee retention credit.
The stimulus bill passed in December, the Consolidated Appropriations Act, as well as the American Rescue Plan Act, passed in February 2021, made modifications to the ERC making it much more appealing. Basically the employee retention credit had a glow-up between 2020 and 2021, it went from the nerdy woman with thick glasses and unkempt 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 couple of factors.
Why Employee Retention 2021 Erc Calculation
Reason, the employee retention credit for both 2020 and 2021 is now offered to PPP recipients, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your employees and then reverse and claim the employee retention credit on those wages as well. The government doesn't look too fondly on paying your payroll for you through the PPP and then you claiming a credit versus the taxes you pay the government on those salaries that the federal government paid for you. So that makes good sense. Now, there's some planning here. If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you require to select the very best covered duration that will get you full PPP forgiveness however likewise maximize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as many expenses 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 toward PPP forgiveness, see? So you 'd wish to discard all your state unemployment insurance contributions on your PPP forgiveness application to leave as much ordinary incomes as possible to take the employee retention credit on.
Another thing to note is you can't subtract the salaries you declared the employee retention credit on, and that makes sense as well, why should the government offer you a deduction for these wages that they already offered you a credit for? Alright, sorry for getting a little sidetracked there, I simply like talking about this stuff, but 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 easier to qualify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you only need to reveal a 20% reduction in gross receipts compared to the exact same calendar quarter in 2019. So this indicates far more services will certify. My organization, for example, experienced a 26% decrease in gross invoices, comparing Q1 2019 to Q1 2021, and it was a comparable story last year too.
So I didn't receive the 2020 employee retention credit first, due to the fact that I got very first round of PPP money and 2nd due to the fact that my business didn't suffer that large 50% decline needed to receive the employee retention credit last year.But for 2021, at least for Q1, yeah, my service qualifies. Likewise, for 2021, for any quarter, you can choose to utilize the lookback quarter, implying that, for instance, even if your Q1 2021 gross receipts aren't a minimum of 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 get approved for Q1 2021 based upon Q1 2021's gross invoices, you will likewise certify for Q2 2021 because you certified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so generally if you simply receive Q1 and Q3 2021, you also qualify for Q2 and Q4 based upon the lookback. Also, even if you didn't have an adequate decline in revenue, you can get approved for the employee retention credit if you were required to totally or partly suspend operations in your company during 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 complete or partial shutdown.
Common example, you own a dining establishment, and your guv signed an executive order mentioning that you need to close down indoor dining. That is an example of a partial shutdown. Not just are more services qualified for the employee retention credit thanks to these brand-new laws, making PPP recipients eligible for the employee retention credit though not on the exact same earnings and making more companies eligible through the 20% decline threshold rather than the 50% decline limit, however the 2021 credit is likewise more profitable 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 amounted to 50% of all certified salaries you paid staff members in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in earnings for that whole time period. So the maximum 2020 credit per employee was $5,000. Okay, however that's nothing compared to the 2021 credit because for 2021, the credit amounts to 70% of qualified incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per staff member ... for that entire period? No. Per quarter. 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 worker per quarter, so we're talking about a maximum credit of $7,000 per employee per quarter. If you're eligible all four quarters, $7,000 times 4 is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per staff member. That's big. That's a godsend to many service owners right now. You see what I mean now, right, how the employee retention credit has gone from ugly duckling in 2020 to lovely swan in 2021? And by the method, by the way, qualified earnings includes employer-paid medical insurance premiums.
If you got PPP and you are eligible for the employee retention credit, then when you do your PPP forgiveness application, you need to choose the best covered duration that will get you full PPP forgiveness however also maximize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply love talking about this things, but 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 easier to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit first, due to the fact that I got first round of PPP cash and second because my business didn't suffer that big 50% decline needed to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my organization certifies. Not just are more services qualified for the employee retention credit thanks to these new laws, making PPP receivers eligible for the employee retention credit though not on the same earnings and making more companies eligible through the 20% decrease threshold rather than the 50% decrease limit, but the 2021 credit is also more lucrative than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit since for 2021, the credit is equal to 70% of qualified wages per staff member paid from January 1, 2021 through December 31, 2021, limited to $10,000 in incomes per employee ... for that entire time duration?
Exactly How to Get going
That will work out on behalf of their clients to get the best rates possible for their existing customers. They will investigate old billings for errors obtaining their clients reimbursements and also tax credits.
Services offered can include:
Committed specialists that will certainly translate highly complicated program regulations and also will certainly be available to address your inquiries, including:
Just how does the PPP finance aspect into the ERC?
What are the differences between the 2020 and also 2021 programs as well as how does it apply to your company?
What are gathering rules for bigger, multi-state companies, and just how do I analyze several states executive orders?
How do part-time, Union, and tipped workers influence the quantity of my reimbursements?
Detailed analysis regarding your qualification
Detailed analysis of your case
Assistance on the claiming procedure as well as paperwork
Details program experience that a routine certified public accountant or payroll processor may not be well-versed in
Smooth as well as fast end-to-end process, from qualification to declaring as well as getting reimbursements
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
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All Set To Get Begun? Its Simple.
1. Whichever company you select to work with will figure out whether your company certifies for the ERC.
2. They will assess your request and compute the maximum amount you can receive.
3. Their team overviews you with the claiming procedure, from starting to finish, including proper documentation.
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 businesses.
You can request reimbursements for 2020 and 2021 after December 31st of this year, right into 2022 as well as 2023. And also potentially past then too.
Many businesses have received reimbursements, and others, in addition to refunds, likewise qualified to continue obtaining ERC in every pay-roll they refine through December 31, 2021, at close to 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, businesses can currently receive the ERC also if they currently obtained a PPP funding. Keep in mind, though, that the ERC will just apply to incomes not used for the PPP.
maintain a 20% decrease in gross billings .
A federal government authority called for partial or full shutdown of your service throughout 2020 or 2021. This includes your operations being limited by commerce, lack of ability to take a trip or limitations of team meetings.
- Gross invoice decrease standards is different for 2020 and also 2021, however is gauged versus the existing quarter as compared to 2019 pre-COVID amounts:
- A federal government authority required partial or full shutdown of your organization throughout 2020 or 2021. This includes your procedures being limited by commerce, failure to take a trip or limitations of group meetings.
- Gross invoice reduction requirements is different for 2020 and 2021, however is measured against the current quarter as compared to 2019 pre-COVID quantities.
Do we still certify if we continued to be open during the pandemic?
Yes. To certify, your service must fulfill either one of the following criteria:
- Experienced a decline in gross receipts by 20%, or
- Needed to alter company procedures as a result of federal government orders
Lots of products are considered as adjustments in service procedures, consisting of changes in job roles and the acquisition of added protective equipment.