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.
How It Functions
This is huge, a lot of small company owners do not understand about this, or they've heard about it, however they don't know much about it, even many tax professionals do not know the ins and outs of this thing because it's brand-new and a great deal of these modificationsthat are helpful to entrepreneur happened in the middle of tax season. So in this video I'm going to go into the employee retention credit, why it's so profitable now in 2021, more profitable, far more lucrative, in reality now than it remained in 2020, 5x more financially rewarding at least. Even if you do not own an organization, be sure to share this video with company owners you know, this video might literally be worth 10s of thousands of dollars for them. And if you are a company owner and after you watch this video you wish to talk with me and a member of my team, who will likewise be either a CPA like myself or an EA, shoot me an e-mail, [email protected], tell me a little about your business and your ballpark year-over-year earnings, and let's see if we can get some more money back in your pocket since you can take this credit against your payroll taxes you pay by decreasing your needed employment tax deposits or you can ask for an advance payment of the credit utilizing 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 stuff since that's the things your CPA ought to fret about. In this video I want to inform you what you require to know 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 informed and take ownership of your own tax scenarios, of your organization's tax scenario to create more money flow in your service and more wealth for yourself.
About Employee Retention Ertc
Alright, now let's dig into this and let's talk about the employee retention credit or the ERC as some folks like to call it, before I get into this, I desire to state that nothing in this video is to be taken as legal or tax advice, this video is for general educational purposes just, yes, I am a CPA and a tax expert, however I am not your CPA nor your tax professional unless you have engaged my company. Another disclaimer here, for functions of this video I am presuming that if you're watching this you are a small company owner, which for employee retention credit purposes indicates one hundred or less staff members for functions of the 2020 credit and 5 hundred or fewer employees for functions of the 2021 credit, if you have a company with over five hundred staff members 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 might deal with a regional tax specialist who is so neck-deep in income tax return today due to the fact that the government extended the tax due date to May 17 or volume is simply the nature of their organization that your tax expert hasn't had the time to dig 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 considering that then, given that the CARES Act? Yes, the employee retention credit has actually 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 due to the fact that of the PPP, the Paycheck Protection Program.
Basically the employee retention credit had a glow-up in between 2020 and 2021, it went from the unpopular lady with thick glasses and unkempt eyebrows and her hair up in 2020 to the belle of the ball for organization 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 Ertc
Factor, the employee retention credit for both 2020 and 2021 is now readily available to PPP recipients, however 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 qualified for the employee retention credit, then when you do your PPP forgiveness application, you need to select the best covered period that will get you complete PPP forgiveness but also maximize your employee retention credit.
Also, for PPP forgiveness, you wish to fill up that payroll bucket with as many expenses as possible that do not count for employee retention credit purposes. For instance, you can't claim the employee retention credit on state unemployment insurance coverage contributions, but state joblessness insurance contributions count towards PPP forgiveness, see? So you 'd wish to discard all your state unemployment insurance contributions on your PPP forgiveness application to leave as much regular wages as possible to take the employee retention credit on.
Another thing to note is you can't deduct the earnings 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 currently provided you a credit for? Alright, sorry for getting a little sidetracked there, I just like talking about this things, but 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 qualify for the employee retention credit in 2021.
In 2021, for a quarter to certify for the employee retention credit, you just require to show a 20% reduction in gross invoices compared to the same calendar quarter in 2019. So this indicates far 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 last year too.
I didn't qualify for the 2020 employee retention credit first, due to the fact that I got first round of PPP cash and second due to the fact that my business didn't suffer that large 50% decline required to certify for the employee retention credit last year.But for 2021, at least for Q1, yeah, my company qualifies. For 2021, for any quarter, you can choose to utilize the lookback quarter, suggesting 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 determining eligibility for the employee retention credit for Q1 2021, you can compare Q4 2020 to Q4 2019. Ramification here is that if you get approved for Q1 2021 based on Q1 2021's gross invoices, you will likewise qualify for Q2 2021 since you certified in the lookback quarter of Q1 2021.
Exact same thing for Q2 to Q3 and Q3 to Q4, so generally if you just receive Q1 and Q3 2021, you also receive Q2 and Q4 based upon the lookback. Even if you didn't have an adequate decline in income, you can qualify for the employee retention credit if you were needed to fully or partly suspend operations in your business throughout any calendar quarter in 2020 or 2021 due to state or federal orders, in which case you are eligible for the employee retention credit throughout that period of complete or partial shutdown.
Typical example, you own a dining establishment, and your governor signed an executive order specifying that you require to close down indoor dining. That is an example of a partial shutdown. Not just are more organizations eligible for the employee retention credit thanks to these new laws, making PPP receivers qualified for the employee retention credit though not on the same incomes and making more services eligible through the 20% decrease threshold rather than the 50% decline limit, but the 2021 credit is also more profitable than the 2020 credit.
Not bad, but that's nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of qualified incomes per employee paid from January 1, 2021 through December 31, 2021, limited to $10,000 in wages per worker ... for that whole time period? For 2021 the portion is more (70% in 2021 vs. 50% in 2020) and you can take it on up to $10,000 in earnings per worker per quarter, so we're talking about a maximum credit of $7,000 per employee per quarter. That's right, folks, the maximum 2021 employee retention credit is $28,000 per employee.
If you got PPP and you are qualified for the employee retention credit, then when you do your PPP forgiveness application, you require to pick the best covered duration that will get you complete PPP forgiveness but likewise optimize your employee retention credit.
Alright, sorry for getting a little sidetracked there, I just enjoy talking about this stuff, 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 easier to certify for the employee retention credit in 2021. I didn't certify for the 2020 employee retention credit initially, due to the fact that I got very first round of PPP money and second because 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 business certifies. Not only are more businesses eligible 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% decrease threshold rather than the 50% decrease threshold, however the 2021 credit is also more lucrative than the 2020 credit.
Not bad, however that's absolutely nothing compared to the 2021 credit due to the fact that for 2021, the credit is equivalent to 70% of qualified earnings per staff member paid from January 1, 2021 through December 31, 2021, restricted to $10,000 in incomes per worker ... for that entire time duration?
Just How to Begin
The best method is to function with a no-risk, contingency-based cost savings business. That will certainly discuss in behalf of their customers to obtain the ideal rates possible for their existing clients. They will certainly examine old invoices for mistakes obtaining for their customers refunds and credits. They can increase the earnings as well as total appraisal of their clients organizations.
Solutions provided can include:
Devoted specialists that will certainly analyze very intricate program policies and also will certainly be available to address your concerns, including:
Just how does the PPP loan variable right into the ERC?
What are the differences in between the 2020 as well as 2021 programs and just how does it put on your company?
What are gathering policies for bigger, multi-state employers, and also just how do I analyze numerous states executive orders?
Just how do part-time, Union, as well as tipped employees influence the amount of my refunds?
Thorough assessment concerning your qualification
Thorough analysis of your case
Guidance on the asserting process and also paperwork
Certain program know-how that a regular certified public accountant or payroll processor could not be well-versed in
Rapid as well as smooth end-to-end process, from qualification to asserting and getting reimbursements
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All Set To Obtain Begun? Its Simple.
1. Whichever firm you select to work with will certainly determine whether your service certifies for the ERC.
2. They will certainly assess your claim and compute the optimum amount you can get.
3. Their group guides you with the claiming process, from beginning to finish, including proper documents.
Frequently Asked Questions (FAQs)
What duration does the program cover?
The program began on March 13th, 2020 and also right on September 30, 2021, for eligible businesses.
You can get reimbursements for 2020 and 2021 after December 31st of this year, right into 2022 as well as 2023. And also possibly beyond then also.
Many companies have received refunds, and also others, along with reimbursements, additionally qualified to proceed getting ERC in every pay-roll they process through December 31, 2021, at about 30% of their payroll expense.
Some businesses have received refunds from $100,000 to $6 million.
Do we still qualify if we currently took the PPP?
Yes. Under the Consolidated Appropriations Act, companies can currently get the ERC even if they already got a PPP car loan. Keep in mind, however, that the ERC will only put on incomes not used for the PPP.
maintain a 20% decrease in gross invoices .
A federal government authority required partial or full shutdown of your organization throughout 2020 or 2021. This includes your operations being restricted by business, inability to take a trip or limitations of group meetings.
- Gross receipt reduction requirements is various for 2020 as well as 2021, yet is determined versus the current quarter as contrasted to 2019 pre-COVID quantities:
- A federal government authority called for partial or complete closure of your business throughout 2020 or 2021. This includes your procedures being limited by business, lack of ability to travel or constraints of team conferences.
- Gross invoice reduction criteria is different for 2020 and also 2021, yet is gauged versus the present quarter as compared to 2019 pre-COVID amounts.
Do we still qualify if we stayed open during the pandemic?
Yes. To certify, your organization must satisfy either among the adhering to standards:
- Experienced a decline in gross receipts by 20%, or
- Needed to change business operations because of government orders
Numerous things are considered as adjustments in service procedures, consisting of changes in job duties and also the purchase of additional safety devices.