Reminder About Erc

In the early stages of the COVID-19 epidemic, the Employee Retention Credit (ERC) was enacted to assist businesses that had been negatively impacted by shutdowns and closures in their efforts to retain their employees. It is a credit that can be refunded for payroll taxes paid on wages that meet specific requirements and are subject to certain employment taxes. Companies that saw a decrease in gross receipts in comparison to 2019 or saw a full or partial suspension of operations due to a government order are eligible for a credit from the ERC of up to $5,000 per qualified employee for the year 2020 and up to $7,000 per qualified employee per quarter for the first three quarters of 2021. This credit is available to companies that met the requirements for the ERC. When more than a minimal amount of an important business’s activities are disrupted by a government order, the company may still be eligible for the Essential Risk Coverage (ERC) under particular circumstances.

Although the Consolidated Appropriations Act of 2021 (CAA) made it possible to provide this desperately needed assistance, it also made things more complicated for taxpayers who received a Paycheck Protection Program (PPP) loan while still being eligible for the Earned Income Tax Credit. These taxpayers should seek counsel to get complete forgiveness of the PPP loan in addition to maximizing the advantages available under the ERC. Because the rules can become rather complex, these taxpayers should be aware of the need of seeking guidance. Even if a taxpayer has already received a PPP loan in 2020 or 2021, they may still be eligible for the ERC on a retroactive basis. Since ERC claims can be filed up to three years after each quarterly payroll tax filing, the time for submitting an ERC claim will not occur until 2023 for the majority of files in 2020 and 2024 for filings in 2021.

The ERC was supposed to wind down its operations on December 31, 2021, however as a result of the Infrastructure Investment and Jobs Act, its existence will no longer be permitted after September 30, 2021. Nevertheless, certain newly established companies that have less than one million dollars in yearly sales (aggregate rules for certain linked organizations apply) may still be eligible for some of the restricted benefits that are being offered under the

2021’s fourth quarter to be exact.

The Paycheck Protection Program, also known as PPP, and the Employee Retention Credit, also known as ERC, Is Your business Taking Complete Advantage of These Financial Aid Programs?

In addition to a broad variety of charges that are eligible for forgiveness, there are a number of additional rules and increased standards for rounds one and two of PPP loans. These may be found in the table below. In addition, a qualifying business may be able to earn up to $33,000 per employee for the years 2020 and 2021 through the Employee Retention Credit (ERC). Although the rules and alternatives may be challenging to understand and negotiate, the potential rewards may be enough to turn your business’s fortunes around.

During the course of this webinar, members of our  COVID-19 Resource Team went over the most recent rules for the eligibility and forgiveness of PPP loans, in addition to the eligibility requirements for 2020 and 2021 Employee Retention Credits. The group spoke about how these two programs interact with one another for businesses that could be qualified for both kinds of advantages. In addition to this, the team discussed the most current IRS advice that was provided as well as the most recent extension and expansion of the ERC program, which now covers “recovery starting business.”

In addition to that, they cleared out some of the most widespread misunderstandings that surround PPP and ERC.

If you have any questions or would like specific items clarified, please do not hesitate to reach out to your Relationship Partner or the session presenters – Greg Wank, Anthony Bracco, David Beckman, Paul Gevertzman, and Joseph Molloy – by sending an email to our COVID-19 Resource Team Inbox at COVID19@ANCHIN.COM. If you have any questions or would like specific items clarified, please do not hesitate to reach out to your Relationship Partner

Disclaimer: The material in this recording that is connected to legislative COVID-19 relief measures is based on information that was available at the time that the webinar was held on April 22, 2021. Although our company has made every reasonable effort to ensure that any information provided related to COVID-19 legislation is accurate, we make no warranties, either expressed or implied, on such information. This is because our firm has made every reasonable effort to ensure that any such information is accurate. In addition, because legislative initiatives are still being pursued, it is possible that more legislation, as well as guidance and clarification from regulators, will come into effect that will change any legislative provisions that have been considered. There is a possibility that some of these amendments may be significant and will have an effect on eligibility for benefits. You are the one who is responsible for deciding whether or not to apply for benefits, which benefits to apply for, and how much amount you want to get in benefits. The lone act of transmitting this information does not have the intention of forming any client-firm connection, nor does its reception constitute such a relationship. Please don’t hesitate to get in touch with a member of our company if you need any special tax or professional assistance. This may include a review of how legislative COVID-19 relief measures may influence you or your business.

How to Receive the Greatest Possible Benefit From the Paycheck Protection Program and the Employee Retention Credit and Their Interaction with One Another?

The Consolidated Appropriations Act (CAA) has made it possible for relief to be provided, but it has also made the tax filing process more complicated for taxpayers who have received a Paycheck Protection Program (PPP) loan and have qualified for the Employee Retention Credit (ERC). These taxpayers should seek counsel in order to obtain complete forgiveness of the PPP loan and maximize the advantage that is available under the ERC. The rules can become fairly complex, therefore it is important that these taxpayers have all of their questions answered.

  • Taxpayers who got a PPP loan in 2020 may still be eligible for the ERC on a retroactive basis if certain conditions are met.
  • Taxpayers are not eligible to claim the ERC on wages from a PPP that are used to erase a PPP loan. There is no such thing as “doubling down.”

When aiming to optimize both advantages and gain the most advantageous interplay between ERC and PPP, there are a few things to keep in mind as follows:

  • When filling out the application for PPP forgiveness, you should carefully consider whether to use the 8-week period or the 24-week covered period. This will allow you to get the most out of both the PPP forgiveness and the ERC without having to use the same wages for both.

It is not the same thing as choosing not to utilize the wages for ERC if you choose to report higher wages on the PPP forgiveness application than are really required. Because the IRS is aware that some borrowers may list wages on the application that are higher than the minimum required to obtain loan forgiveness in its entirety, the agency gives the taxpayer the option of limiting the number of wages for which the ERC “opt-out” election is made to the minimum required to obtain forgiveness based on the expenses that are listed on the application that was submitted.

The absolute minimum amount of payroll costs required to qualify for loan forgiveness through the PPP is equivalent to sixty percent of the entire loan amount, in addition to any other qualified expenditures that were disclosed on the application for loan forgiveness. The PPP forgiveness application must not include any charges other than payroll costs in order for there to be a minimum amount of payroll costs equal to one hundred percent of the loan amount. As a result of this, it is essential to ensure that the application contains all acceptable nonpayroll charges.

Additional factors to take into consideration:

  • The Internal Revenue Service (IRS) only recently issued guidelines indicating that the PPP forgiveness did not need to be included in the Gross Receipts test to determine whether or not taxpayers reached the 50 percent reduction in 2020 or the 20 percent reduction in 2021 in order to qualify.
  • It is important to take note that the Infrastructure Bill, which was approved by the Senate on August 10, 2021, contains a provision that would terminate the ERC for the majority of employers as of September 30, 2021. This date is one full quarter earlier than the current termination date, which is December 31, 2021. This might have an effect on the decision-making process over the time to select as the PPP covered period if it were to become a law, enacted that PPP wages earned after September 30th might still be eligible.

To Get the Most Out of the New Stimulus Package, Careful Planning Is Necessary to Take Advantage of the Enhanced Employee Retention Credit (ERC)

Businesses who are impacted by COVID-19 and continue to pay their employees’ wages are eligible for the ERC, which is a refundable tax credit for payroll taxes. The original version of this provision (which came from the CARES Act) had a very narrow scope, but the most recent version has broadened the pool of taxpayers who are eligible for the credit while simultaneously increasing the total amount of that credit. This is in time to the original version, which had a very narrow scope.

2020 Refund Opportunities

You are now able to retrospectively make a refund claim for ERC if you were eligible for a loan under the Paycheck Protection Program (PPP) in 2020 but did not submit a claim for it. Please refer to the following essential details:

  • The credit is equal to fifty percent of qualified wages per employee, with a maximum of five thousand dollars per employee per year, and it applies to salaries paid between March 12, 2020 and December 31, 2020 (the credit equals ten thousand dollars in qualified wages multiplied by fifty percent of the tax credit).
  • You are not eligible to make a claim for the credit on wages that were paid using funds from a forgiven PPP loan (no double dipping). As a result, one has to give some attention to the costs that are included in the applications for PPP forgiveness in order to make the most of the PPP forgiveness and the ERC.
  • Employers with less than one hundred employees are eligible, regardless of whether or not the employees who were paid were actually putting in hours. If you have more than 100 people working for you, you can only claim the credit for wages given to employees who were not working during the qualifying period.
  • Taxpayers are eligible for this credit if their business was forced to shut down because of a COVID-19 lockout or if there was a revenue drop of at least 50 percent as compared to the same quarter in 2019.
  • You can file a claim for a refund together with your payroll tax return for the fourth quarter, which is due on January 31, 2021.

2021 Planning

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