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?