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 Functions
Even if you do not own a company, be sure to share this video with business owners you understand, this video could literally be worth tens of thousands of dollars for them. And if you are a business owner and after you view 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 service 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 versus your payroll taxes you pay by lowering your needed work tax deposits or you can request an advance payment of the credit utilizing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Since that's the things your CPA should worry about, I am not going to get into the intricacies of that type here or the Form 941 and all the payroll stuff. 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 have not you told me about this?" so you can be notified and take ownership of your own tax scenarios, of your company's tax scenario to produce more cash circulation in your service and more wealth on your own.
About Employee Retention 2021 Ertc Qualifications
Alright, now let's dig into this and let's discuss 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 nothing in this video is to be taken as legal or tax advice, this video is for basic informative functions just, yes, I am a tax and a cpa professional, however I am not your CPA nor your tax professional unless you have actually engaged my firm as such. Another disclaimer here, for functions of this video I am presuming that if you're enjoying this you are a small organization owner, which for employee retention credit functions indicates one hundred or fewer employees for functions of the 2020 credit and 5 hundred or fewer staff members for functions of the 2021 credit, if you have a company with over five hundred employees I picture you have in-house counsel, in-house CPAs who are on top of this things, however I'm here for you small company owners who might deal with a local tax specialist who is so neck-deep in tax returns right now since the government extended the tax deadline to May 17 or volume is simply the nature of their business that your tax expert hasn't had the time to dig into the weeds here like I have.
So employee retention credit, why is it so financially rewarding for company owners in 2021 and why weren't we discussing it in 2020, it's been around ever since, considering that 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 last year 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.
Essentially the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular lady with thick glasses and neglected eyebrows and her hair up in 2020 to the belle of the ball for business owners in 2021. Why is the employee retention credit more attractive now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention 2021 Ertc Qualifications
Very first reason, the employee retention credit for both 2020 and 2021 is now available to PPP recipients, however obviously 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 claim the employee retention credit on those salaries. The federal government doesn't look too fondly on paying your payroll for you through the PPP and then you claiming a credit against the taxes you pay the federal government on those earnings that the government spent for you. That makes sense. Now, there's some planning here. If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to choose the very best covered duration that will get you full PPP forgiveness however also maximize your employee retention credit.
For PPP forgiveness, you want to fill up that payroll pail with as numerous expenses as possible that don't count for employee retention credit purposes. You can't declare the employee retention credit on state joblessness insurance contributions, but state unemployment insurance coverage 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 incomes as possible to take the employee retention credit on.
Another thing to note is you can't deduct the earnings 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 currently gave 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 reason 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.
In 2021, for a quarter to qualify for the employee retention credit, you only need to reveal a 20% decrease in gross receipts compared to the exact same calendar quarter in 2019. So this means even more services will certify. My organization, for example, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story last year too.
So I didn't get approved for the 2020 employee retention credit initially, since I got first round of PPP cash and 2nd due to the fact that my service didn't suffer that large 50% decrease needed to certify for the employee retention credit last year.But for 2021, a minimum of for Q1, yeah, my service certifies. Likewise, for 2021, for any quarter, you can elect to utilize the lookback quarter, implying that, for instance, 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. Ramification here is that if you qualify for Q1 2021 based upon Q1 2021's gross invoices, you will also certify for Q2 2021 given that you certified in the lookback quarter of Q1 2021.
Same thing for Q2 to Q3 and Q3 to Q4, so essentially if you simply qualify for Q1 and Q3 2021, you likewise receive Q2 and Q4 based on the lookback. Also, even if you didn't have a sufficient decline in revenue, you can certify for the employee retention credit if you were required to completely or partly 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 full or partial shutdown.
Common example, you own a restaurant, and your guv signed an executive order mentioning that you require to shut down indoor dining. That is an example of a partial shutdown. Also, not only 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 very same incomes and making more businesses eligible through the 20% decrease limit instead of the 50% decline threshold, but 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 salaries for 2020, the employee retention credit was equivalent to 50% of all certified incomes you paid staff members in between March 12, 2020, and December 31, 2020, with a limitation of $10,000 in earnings for that entire period. So the maximum 2020 credit per employee was $5,000. Not bad, however that's nothing compared to the 2021 credit since for 2021, the credit is equivalent to 70% of certified earnings per worker paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per staff member ... for that whole 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 salaries per worker per quarter, so we're talking about an optimum credit of $7,000 per staff member per quarter. If you're qualified all 4 quarters, $7,000 times 4 is $28,000. That's right, folks, the maximum 2021 employee retention credit is $28,000 per worker. That's big. That's a blessing to many service owners today. You see what I mean now, right, how the employee retention credit has gone from unsightly duckling in 2020 to stunning swan in 2021? And by the way, by the way, qualified wages includes employer-paid medical insurance premiums.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to choose the finest covered duration that will get you complete PPP forgiveness however likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just like talking about this stuff, 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 simpler to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, because I got first round of PPP money and 2nd due to the fact that my organization didn't suffer that large 50% decrease required to qualify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my business qualifies. Not only are more companies eligible for the employee retention credit thanks to these brand-new laws, making PPP recipients qualified for the employee retention credit though not on the very same earnings and making more companies eligible through the 20% decrease limit rather than the 50% decline threshold, 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 certified salaries per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that whole time duration?
Just How to Get going
That will work out on behalf of their customers to obtain the finest costs feasible for their existing clients. They will certainly investigate old billings for errors obtaining their clients refunds and also credits.
Services supplied can include:
Devoted specialists that will interpret very complex program rules and also will certainly be available to address your questions, including:
How does the PPP lending variable right into the ERC?
What are the differences in between the 2020 as well as 2021 programs as well as just how does it put on your organization?
What are aggregation policies for larger, multi-state employers, and just how do I interpret multiple states executive orders?
How do part-time, Union, and also tipped staff members influence the amount of my refunds?
Extensive examination concerning your eligibility
Detailed analysis of your situation
Assistance on the declaring process and documentation
Details program proficiency that a normal certified public accountant or pay-roll processor may not be well-versed in
Smooth and also fast end-to-end procedure, from eligibility to asserting as well as obtaining reimbursements
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|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Obtain Begun? Its Simple.
1. Whichever business you select to work with will determine whether your organization certifies and gets approvel for the ERC.
2. They will certainly evaluate your request and also calculate the maximum quantity you can get.
3. Their team guides you through the asserting process, from starting to end, including proper paperwork.
Frequently Asked Questions (FAQs)
What period does the program cover?
The program began on March 13th, 2020 and finishes on September 30, 2021, for eligible companies.
You can request refunds for 2020 and 2021 after December 31st of this year, right into 2022 and also 2023. As well as potentially beyond after that as well.
Many organizations have received refunds, and others, along with refunds, additionally qualified to proceed getting ERC in every payroll they process through December 31, 2021, at about 30% of their pay-roll cost.
Some organizations have gotten reimbursements from $100,000 to $6 million.
Do we still qualify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can currently qualify for the ERC even if they already received a PPP lending. Note, however, that the ERC will only put on wages not used for the PPP.
Do we still qualify if we did not) sustain a 20% reduction in gross receipts .
A government authority needed partial or complete closure of your organization during 2020 or 2021. This includes your operations being restricted by business, inability to travel or constraints of group conferences.
- Gross invoice reduction standards is different for 2020 and also 2021, yet is gauged against the current quarter as compared to 2019 pre-COVID quantities:
- A federal government authority needed partial or complete closure of your business during 2020 or 2021. This includes your procedures being limited by business, failure to take a trip or restrictions of team conferences.
- Gross invoice decrease standards is different for 2020 and also 2021, however is determined against the existing quarter as contrasted to 2019 pre-COVID quantities.
Do we still certify if we remained open throughout the pandemic?
Yes. To certify, your company must satisfy either one of the adhering to criteria:
- Experienced a decline in gross receipts by 20%, or
- Had to transform organization operations as a result of federal government orders
Lots of products are taken into consideration as adjustments in service procedures, including shifts in work functions and the purchase of extra protective devices.