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 don't own an organization, be sure to share this video with service owners you know, this video might actually be worth 10s of thousands of dollars for them. And if you are a company owner and after you view this video you want 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], tell me a little about your service and your ballpark year-over-year revenue, and let's see if we can get some more money back in your pocket since you can take this credit versus your payroll taxes you pay by lowering your required 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.
Because that's the stuff your CPA ought to stress about, I am not going to get into the intricacies of that form here or the Form 941 and all the payroll things. In this video I desire to tell you what you require to know so you can go to your CPA and state, "Hey, what about this employee retention credit, why have not you informed me about this?" You can be notified and take ownership of your own tax circumstances, of your business's tax situation to create more cash flow in your company and more wealth for yourself.
About Employee Retention Credit 2021
Alright, now let's go into this and let's discuss the employee retention credit or the ERC as some folks like to call it, before I enter into this, I want to state that nothing in this video is to be taken as legal or tax guidance, this video is for basic educational purposes just, yes, I am a tax and a cpa expert, however I am not your CPA nor your tax professional unless you have actually engaged my company as such. Another disclaimer here, for functions of this video I am presuming that if you're enjoying this you are a small business owner, which for employee retention credit functions indicates one hundred or fewer employees for functions of the 2020 credit and five hundred or less staff members for purposes of the 2021 credit, if you have a business with over 5 hundred staff members I imagine you have in-house counsel, in-house CPAs who are on top of this stuff, but I'm here for you small company owners who might work with a regional tax expert who is so neck-deep in tax returns today due to the fact that the government extended the tax due date to May 17 or volume is just the nature of their company that your tax professional hasn't had the time to go into the weeds here like I have.
Employee retention credit, why is it so rewarding for service owners in 2021 and why weren't we talking about it in 2020, it's been around because then, because the CARES Act? Yes, the employee retention credit has 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 because of the PPP, the Paycheck Protection Program.
Essentially the employee retention credit had a glow-up between 2020 and 2021, it went from the unpopular lady with neglected eyebrows and thick glasses and her hair up in 2020 to the belle of the ball for business owners in 2021. Why is the employee retention credit more appealing now thanks to the Consolidated Appropriations Act and the American Rescue Plan Act?
Why Employee Retention Credit 2021
Factor, the employee retention credit for both 2020 and 2021 is now readily available to PPP receivers, but of course you can't double dip. You can't get PPP for the hundred thousand dollars you paid your employees and then turn around and declare the employee retention credit on those wages. 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 likewise maximize your employee retention credit.
Likewise, for PPP forgiveness, you desire to fill that payroll pail with as lots of costs 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 joblessness insurance coverage contributions count towards PPP forgiveness, see? You 'd desire to dump all your state joblessness insurance contributions on your PPP forgiveness application to leave as much regular earnings as possible to take the employee retention credit on.
So this can get extremely technical really fast and it's really scenario particular in terms of enhancing PPP vs. ERC and my company has tools to figure this things out for you, I'm not going to go into all that here, however feel in one's bones that you truly have to do the math 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 deduct the wages you declared the employee retention credit on, and that makes sense also, why should the government provide you a reduction for these incomes that they currently gave you a credit for? So basically the credit is tax-effected. Alright, sorry for getting a little sidetracked there, I simply enjoy discussing this stuff, however let's discuss another factor why the employee retention credit is more appealing now than it was last year, which is that it's easier to receive the employee retention credit in 2021. In 2020, for a quarter to qualify for the employee retention credit, you needed to reveal a 50% decrease in gross receipts compared to the same calendar quarter in 2019.
In 2021, for a quarter to certify for the employee retention credit, you only need to reveal a 20% decrease in gross receipts compared to the same calendar quarter in 2019. So this suggests even more services will certify. My organization, for instance, experienced a 26% decrease in gross receipts, comparing Q1 2019 to Q1 2021, and it was a similar story in 2015 too.
So I didn't get approved for the 2020 employee retention credit initially, because I got preliminary of PPP cash and 2nd due to the fact that my company didn't suffer that large 50% decline required to qualify for 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 elect to use 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 invoices, 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. Ramification here is that if you receive Q1 2021 based on Q1 2021's gross invoices, you will likewise receive Q2 2021 considering that you certified in the lookback quarter of Q1 2021.
Very same thing for Q2 to Q3 and Q3 to Q4, so generally if you just qualify for Q1 and Q3 2021, you also receive Q2 and Q4 based on the lookback. Also, even if you didn't have a sufficient decrease in earnings, you can qualify for the employee retention credit if you were needed to fully or partly 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 during that period of complete or partial shutdown.
Common example, you own a restaurant, 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 only are more organizations qualified for the employee retention credit thanks to these new laws, making PPP recipients eligible for the employee retention credit though not on the exact same earnings and making more organizations eligible through the 20% decline limit rather than the 50% decline threshold, however 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 equal to 70% of certified incomes per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that whole time duration? For 2021 the percentage is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in wages per staff member per quarter, so we're talking about an optimum credit of $7,000 per worker per quarter. That's right, folks, the optimum 2021 employee retention credit is $28,000 per staff member.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you need to select the finest covered period that will get you complete PPP forgiveness but also optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I simply like talking about this stuff, however let's talk about another reason 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 very first round of PPP cash and second since my service 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 just are more services qualified for the employee retention credit thanks to these new laws, making PPP recipients qualified for the employee retention credit though not on the same salaries and making more businesses eligible through the 20% decrease limit rather than the 50% decrease threshold, but the 2021 credit is also more profitable than the 2020 credit.
Not bad, but that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equal to 70% of qualified salaries per employee paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in earnings per employee ... for that entire time duration?
Just How to Start
The very best method is to deal with a no-risk, contingency-based cost financial savings firm. That will work out in support of their clients to obtain the finest rates possible for their existing clients. They will examine old billings for errors obtaining for their clients reimbursements and also tax credits. They can raise the profitability as well as total assessment of their clients companies.
Assistance supplied can include:
Devoted professionals that will interpret highly complex program rules and also will be offered to address your inquiries, including:
Just how does the PPP lending element into the ERC?
What are the differences between the 2020 as well as 2021 programs and also just how does it relate to your business?
What are gathering regulations for larger, multi-state employers, and exactly how do I interpret numerous states executive orders?
Just how do part-time, Union, and also tipped staff members impact the amount of my refunds?
Complete analysis concerning your eligibility
Extensive evaluation of your situation
Advice on the asserting procedure and also paperwork
Particular program knowledge that a regular certified public accountant or payroll processor might not be well-versed in
Rapid and smooth end-to-end process, from eligibility to claiming and obtaining reimbursements
|Adams Brown Strategic Allies and CPAs
|Finance Pro Plus
|Bottom Line Concepts
|Equifax Workforce Solutions
|Omega Funding solutions
|Disisaster Loan Advisors
Ready To Get Going? Its Simple.
1. Whichever company you select to work with will certainly figure out whether your company certifies for the ERC.
2. They will certainly evaluate your claim and also compute the maximum quantity you can obtain.
3. Their team overviews you with the claiming procedure, from starting to finish, including correct documentation.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program started on March 13th, 2020 as well as finishes on September 30, 2021, for qualified companies.
You can request refunds for 2020 and 2021 after December 31st of this year, into 2022 and 2023. As well as potentially past after that as well.
Many companies have received reimbursements, and others, in addition to reimbursements, additionally qualified to proceed receiving ERC in every payroll they process to December 31, 2021, at around 30% of their payroll expense.
Some businesses have obtained reimbursements from $100,000 to $6 million.
Do we still certify if we already took the PPP?
Yes. Under the Consolidated Appropriations Act, services can currently receive the ERC even if they currently received a PPP car loan. Keep in mind, however, that the ERC will only relate to salaries not utilized for the PPP.
maintain a 20% decrease in gross billings .
A federal government authority needed full or partial shutdown of your company throughout 2020 or 2021. This includes your procedures being restricted by business, inability to travel or limitations of team meetings.
- Gross receipt reduction requirements is various for 2020 as well as 2021, however is gauged versus the present quarter as contrasted to 2019 pre-COVID amounts:
- A government authority required full or partial closure of your company during 2020 or 2021. This includes your operations being restricted by business, failure to take a trip or restrictions of team conferences.
- Gross invoice decrease criteria is different for 2020 and also 2021, yet is measured against the existing quarter as contrasted to 2019 pre-COVID amounts.
Do we still qualify if we remained open during the pandemic?
Yes. To qualify, your business needs to meet either among the following criteria:
- Experienced a decline in gross invoices by 20%, or
- Needed to transform company procedures as a result of federal government orders
Several things are thought about as changes in organization operations, consisting of changes in job duties as well as the acquisition of extra safety devices.