Businesses can now claim both PPP forgiveness and the Employee Retention Credit if they use different wages for each. ERC covers up to 50% of qualified W-2 wages, capped at $5,000 per employee in 2020 and $10,000 in 2021. A single quarter with 25% lower revenue than the same quarter last year qualifies you.
Hello. Hello. Today I'll be pretty quick. I just wanted to go over a few things, common questions that we've been seeing about the Employer Retention Credit and the PPP loans. So as a background, when the PPP loans came out, The previous rules were that if you got one of those in 2020, that you did not qualify to also get this thing called the Employer Retention Credit. Those rules have since been changed. Right at the end of last year, they updated them so that you can do both. The only thing is, is that you can't use the same wages. So let me explain what that means. The Employer Retention Credit only works on W-2 wages filed, which are filed on Form 941. And hopefully, if you have 941s, you have a payroll company that has helped you with that. Your PPP loan was based on wages that you paid, but it could also include the amount of money you made as an owner, even if you didn't give yourself a W-2. So that is a little bit of a difference. Now, that being said, let's assume you have W-2 coaches so that we can talk about the Employer Retention Credit. If I used 2.5 months of payroll to— for my PPP loans that then was forgiven, I can't use the same wages during that 2.5-month period. Or however long it took you to. So it has to be a different dollar amount of the wages. So let's say I get the PPP loan and I'm using it in April, May, and June. And now I've used it all up. So now to qualify for the Employer Retention Credit, I'm going to use the wages I paid July, August, September, October, November, December. See, that's what I'm— that's what I'm trying to say. You can't use the same wages. I can't use the April, May, June wages to not only get my PPP loan forgiven and also apply for this Employee Retention Credit. We did send out a blog post, and so if you want more intricacy details about the Employee Retention Credit, feel free to check it out there. But the gist is, as a gym, which you guys are, You qualify. Anyone who had a partial or full shutdown because of the government is qualified for this, and you can receive up to 50% of qualified wages, maxing out at $5,000 per employee. They've since changed it also. 2021, you can actually max it out at $10,000, and it goes from January 1st to July. I think. I believe is the end cutoff date, or end of June. The way you get this credit is you have to amend your past payroll returns. So check with your payroll provider. They are going to have steps and instructions on how you qualify or how you actually file for the Employer Retention Credit. So that's that. The other questions So a couple questions I've gotten. Hey, if I got the PPP loans but I'm the only employee but I don't actually give myself a W-2, do I qualify? No, you don't qualify for the Employee Retention Credit if that's the case. Again, it's only on wages paid that were claimed on a 941 filing. On the PPP loans, there's now a second round that you can qualify for, you need to apply for, and they actually just changed the rules as of this week. If in the past, if the first one that you got was purely based on like your net income because you don't pay employees, you are now able to use a higher number in your calculation of how much of a PPP loan you qualify for. So check that out. I had one person ask or felt like they didn't qualify because they got a large deposit at the end of the year. Which meant they only had an 18% loss of revenue compared to more than 25%. So let me clarify, the rules are if in any one of the quarters you're down 25% compared to the previous quarter. So for our clients, quarter 2 or quarter 3 is usually allowing them to qualify. So what that means is I'm going to look at my revenue of April, May, and June in 2020, and I compare that to the revenue from 2019 of April, May, and June, and if the 2020 number is less than 25%, even if my company grew by the end of the year, if that one quarter alone has— shows a 25% reduction in gross revenue, then I qualify. So you do have companies that if they pulled their act together and were able to make 2020 a better year, even if there's one quarter, they still qualify. So please make sure you're doing the analysis. So, 'cause if you can qualify, obviously you wanna do that. So hopefully that helps a little bit of, you know, more, Detailed topics today. Next time, hopefully I'm trying to schedule a gym owner, Chris Thorndike. He's gonna be a guest on our next Facebook Live, and man, he he did some crazy awesome things during the COVID shutdown, and I want to talk through his thought process on what happened. I'll give you a little teaser: He basically reduced the size of his gym that he's using, which reduces cost. And he massively increased how much he's charging and he's doing really well. So we're gonna talk through that with him. All right, guys, remember, profit is a choice. Have the courage and wisdom to choose it.
