Updated: Jan 5
Brian Goodwin from Incentax gives us some great insights into the Employee Retention Credit. He explains what it is and who its for, as well as how it came about. You can watch the video but I have also included a full transcript of the conversation below.
Learn more about Brian in the links below:
Get your HR and Insurance questions answered here
Book your PEO Audit and have Steve shop PEO services on your behalf here
Steve: So Brian. Employee Retention Credit. I've heard of R&D tax credits but I haven't heard of the Employee Retention Credit yet. You blew my mind when you first talked about it. Can you explain to people in my network exactly what the Employee Retention Credit is and how it works? Brian: Yeah absolutely. So, this credit came out at the same time as the PPP loans back in April of 2020 as part of the government's COBRA relief. Back then you had to pick between PPP and this credit. The difference was money now versus money later. Everybody's like, "Well, give me the money now," so everybody wants PPP loans. I don't want to wait. So, the Employee Retention Credit went widely unused for 2020. At the end of 2020, Congress looked back and said, "Alright, well nobody did this, so let's change it." The big change was, if you took a PPP loan you can now also take advantage of this Employee Retention Credit. So, even being in the tax world, the tax credit consulting world, it took us two months to realize that as well. They made this change and nobody knew. Over last year certain people were starting to realize but we're still talking to people every day who think that they don't qualify or don't even know what it is. It's simply this. If a business was negatively affected by COVID19 either through a qualified revenue decline or a potential business suspension that made them reduce the way, or restrict the way, that they dealt with their clientele by following a COVID19 order, then there's potential credits that are available to them based off the fact that they still paid employees while going through their struggles. Steve: Oh wow, so the government is basically saying, "If you did the right thing and you tried to help your employees out we'll back you up on that and here's a credit." Brian: They are and the name actually throws people off. Right? They says it's the employee retention. I lost employees, I don't qualify. It's not that, there's nobody here that's going to penalize anybody for having to lay somebody off or firing somebody. It's that you're being rewarded for the ones you did keep and that you were able to pay. The payout on this can be pretty substantial for a business owner. A business could get up to five thousand dollars per W-2 employee that they had in 2020. And then for 2021, when Congress made the changes, they made it more robust. So now a business can also get in 2021 up to seven thousand dollars per w-2 employee for each of the first three quarters. So, you're looking at a max potential of $26,000 for a single employee. Steve: Really? Every quarter? I mean, I'm sorry, I'm not trying to sound like an infomercial or something like that. That's actually, so every quarter in 2021, so Q1, Q2, Q3. $7K, $7K, $7K potentially, If I kept them through that that time? Brian: Yeah and that comes down to, one, did you have a qualifying criteria during the time frame? How much did you pay the employee? But even a percentage can still be substantial. I mean, a 10 employee company, they're looking at, let's see. What do we got? 70s to 210 to about $260,000 of max potential. Even if they get half of that, they're not going to be upset when they get $130,000. There's just a lot of opportunity out there for businesses that you still need to hear about this. Steve: Thank you for sharing that with me and to my network. I hope this was super helpful for you guys to hear about because I personally have never heard of the Employee Retention Credit until Brian brought it up to me. Thank you Brian for sharing that. I'll leave a link to his profile down below if you guys want to go ahead and reach out to him and learn more about this. but thought I would share it with everyone because i know there's a lot of HR folks, a lot of controllers, CFOs, and sales people out there in the payroll and tax world in my network. Definitely wanted to share it with you guys and keep you abreast on something that's not my wheelhouse, so I'm happy to bring in the experts. Thank you so much, Brian. Brian: Yeah. Yeah. Happy to help.