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PPPL Excel Workbook Tune-up
PPP Loans – The 2021 ERC
Saturday March 13, 2021
Kevin Cameron MBA CPA
“A man is only as good as his tools.” -Emmert Wolf
VERSION 2 HAS BEEN RELEASED (ERC and PPP Round 2)NEW 52+ minute walkthrough video at https://youtu.be/rMsO4oGdK30
$179 from Leimberg Information Services using this link:
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The extended ERC to June 30,
2021 is far easier to qualify for (But,
will be extended to 12/31/21,
assuming Biden signed the law
yesterday).
The credit is far more generous.
But, there are the same issues with
the interplay with PPP round 2
loans.
Employee Retention
Credit for 2021 – It’s the
same, but different!
Decline in Gross Receipts Test
The requirement to show a 50% decline in
gross revenue changes to 20%.
For Q1 2021:
Compare Q1 2021 to Q1 2019 OR
Compare Q4 2020 to Q4 2019.
For Q2 2021:
Compare Q2 2021 to Q2 2019 OR
Compare Q1 2021 to Q1 2019.
Yes, it’s that easy.
Can you force yourself into qualifying?
Presumably, yes, but IRS may issue some
anti-abuse rules.
How do you qualify?Meet one or two tests
Be subject to a partial- or full-shutdown
order.
Presumably the qualification here will be
similar to what 2020’s rules are, but IRS has
not provided guidance on the 2021 ERC
yet.
Assuming it is similar to guidance on the
2020 ERC, the shutdown order will need to
have a more than nominal effect on the
business
How do you qualify?Meet one or two tests
Here is where the 2021 ERC differs
significantly from 2020 ERC.
Not only is it easier to qualify, but credit
amount stands to be significantly larger.
Credit amount is 70% of the first $10,000 of
wages paid to EACH employee for EACH
calendar quarter.
This is much more liberal than the 2020
ERC.
How much is the credit?
The FTE cap goes up from 100 for
the 2020 ERC to 500 for the 2021
ERC.
This will make far more employers
eligible for the credit.
This still applies to the test of
whether the employee provided
services to the employer or not.
Does the FTE cap remain the same for 2021?
The interplay between PPP round 2 loan
and 2021 ERC are the same as the PPP
round 1 loan and 2020 ERC:
You cannot use the same wages for both.
Because of the more generous wage limit
for 2021, it will be more difficult to maximize
the benefits of both.
You will want to maximize PPP loan
forgiveness first.
How does the PPP
Round 2 loan affect the
availability of the ERC?
There are essentially 3 ways to
obtain the credit:
1. Apply for an Advance
Payment on Form 7200.
2. Reduce your payroll tax
deposits.
3. Wait and claim the credit on
your Form 941 for the
applicable quarter.
When do I get the credit?
Strategies to consider:
1. For qualified employers who received a
PPP round 2 loan:
a) What date did your PPP round 2 loan
get funded? You may qualify for
ERC for all wages paid from 1/1/21 to
funding date.
i. Example: You qualify for ERC for
Q1 2021. You received your PPP
round 2 loan on 2/24/21.
ii. Wages paid from 1/1/21 to
2/23/21 automatically qualify for
the ERC, because they don’t
count towards the PPP.
What Strategy should you
employ to maximize the
ERC?
Strategies to consider:
1. If you qualify for Q1 2021 ERC and you
qualify for the PPP round 2 loan, but
have not received it yet, defer funding
the loan for as long as you can.
2. Be sure you take advantage of the
$10,000 wage cap PER quarter.
a) If you pay bonuses in Q2 2021,
consider paying some in Q1 2021.
b) Example, employee makes $8,000
per quarter. Will get a $3,000 bonus
in Q2 2021. Pay $1,000 of the bonus
in Q1 2021.
What Strategy should you
employ to maximize the
ERC?
Strategies to consider:
1. Maximize your non-wage portion of the
PPP forgiveness. This may free up more
wages to be used for ERC.
a) Remember, the 60% test still applies for
PPP round 2 loans.
b) You must use at least 60% of the loan
for payroll costs.
c) So, a PPP loan of $200,000 requires at
least $120,000 to be used on payroll
costs.
d) Remember also that more than wages
are in the payroll cost category.
What Strategy should you
employ to maximize the
ERC?
Strategies to consider:
1. Rehire employees sooner. If you planned
to ramp up operations post-COVID,
consider bringing employees on sooner
to maximize both PPP forgiveness and
ERC.
2. Timing is everything. You will need to
carefully consider how much wages
you’ll need for PPP forgiveness before
claiming the ERC.
3. If you can afford to wait, you may want
to claim the credit on Form 941.
What Strategy should you
employ to maximize the
ERC?
Yes, that is correct.
But, with Notice 2021-20, we have some
indication on how IRS is going to handle
the 2021 ERC.
Since IRS has not issued
guidance on the 2021
ERC, aren’t we in the
dark on this?
PPPL Excel Workbook Tune-up
PPP Loans – The 2021 ERC
March 13, 2021
Kevin Cameron MBA CPA
