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?