Additional Tax Planning Opportunities

I’m getting a lot of questions on whether the PPP Loan is better than the Employer Retention Credit. Last year, the question was which one should I use. Now that you can do both, the point is that if you qualify, you should certainly do both.

I’m going to go through some math now. I know that it can be tedious, but in order to understand how this can help you, the math is the answer. Bear with me. It’s not that complex.
You have ten employees that are paid $4,000 each per month. On the PPP that’s $40,000 in monthly payroll times 2.5 or a total loan of $100,000.

Then there is the retention credit for the first two quarters of 2021. Your workers make $12,000 per quarter but the credit stops at $10,000. It’s 70% of the first $10,000 per worker per quarter. That’s 70% of $100,000 or $70,000 per quarter totaling $140,000.

One would be a complete fool if they stopped their analysis at that point. Please remember that you can do both.

In our scenario the sample company gets their PPP Loan on February 14th of 2021. That means that they can claim the Employer Retention Credit from January 1 through February 13, 2021. That’s $10,000 in payroll per week for six weeks totaling $60,000 for the period. At a 70% credit, they can also get an additional $42,000 in refundable retention credit money.

Please remember that they received an $100,000 PPP Loan on February 14th. If they have a payroll of $10,000 per week they will go through the PPP Money in 10 weeks. That means that we can claim the Employer Retention Credit beginning June 1st in the second quarter of 2021. Four weeks at $10,000 is another $40,000 in payroll at 70% for the credit is another $28,000.

So what did we just do? We received $42,000 in retention credit in the first quarter, a forgivable PPP Loan of $100,000, and another $28,000 in retention credit in the second quarter.
That’s a total of $170,000 from the government based upon $240,000 in payroll from the first two quarters of 2021.

The correct question isn’t which is better. The question has become how can we possibly do both.
Please don’t act like this is easy. It isn’t. The accounting work involved is exacting and time consuming, but we would all be fool’s to not take advantage of the system while it’s in place.
Please let us know how we can help you.

Let me leave you with this.

I’m getting a lot of inquiries in reference to the CARES Act money that’s out there. It seems as if there are a lot of accountants who haven’t taken the time to educate their clients about how they can benefit from this.

Further there are practitioners out there who haven’t taken the time to figure out how to do all of these new forms. Also, there are others who are doing them incorrectly.

If you find yourself in one of those categories we would love to help you.

In further news, we filed all of the extensions for the March 15th deadline yesterday. If you are an S-Corp or a straight 1065 partnership, your deadline is now March 15th.

The form provides an automatic six month extension on the return. There isn’t anything that you need to do. We will get you a copy of the extension form in the next few days.

Again, the extension doesn’t extend the period of any payments which are still due on March 15, 2021. If you would like to make a deposit for your state return, please let us know.

We’re all going to get through this. Let’s get through it together.

Accounting Solutions Ltd stands ready to complete our mission and purpose of protecting you, your family, and your business. If there is anything you need, whether you are a current client or not, you have but to ask. I’m here and I remain,
Sincerely yours,

Chris Amundson
Accounting Solutions Ltd.

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