Employee Retention Credit (Under Cares Act)

Information regarding the Employee Retention Credit (ERC) (As applied to employers with fewer than 100 employees)

To qualify, employers must meet one of the following criteria:

• Business must have been suspended or suffered reduced business hours due to a governmental order. Credit APPLIES ONLY to the portion of the quarter the business is suspended, not the entire quarter.
• Business must have experienced a decline in gross receipts as follows:
  
  • ​​2020 - CARES ACT - More than 20% reduction of gross receipts in the same quarter as compared to 2019
  • 2021 - CONSOLIDATED APPROPRIATIONS ACT 
    
    • ​Impacted by forced closures or quarantines OR
      
    • More than 20% reduction of gross receipts in the same quarter as compared to 2019
  • *NEW BUSINESSES HAVE SPECIAL RULES WHICH WILL APPLY
    
  • 2021 - AMERICAN RESCUE PLAN ACT
    
    • Provides special rules for a "Recovery Startup Business" (RSB)
    • This applies to new businesses starting after February 15, 2020
  • 2021 - INFRASTRUCTURE INVESTMENT AND JOBS ACT
    • Removes an eligibility condition for RSB's. Essentially all RSB's are eligible for 4th quarter
• Qualifying Wages - Wages subject to FICA AND Qualified Health Expenses
  • 2020
    • Paid after 3/12/20 through 12/31/20
      • 50% of qualified wages of up to $10,000 for the YEAR (per employee, maximum credit of up to $5,000 per employee)
  • 2021
    • Paid in first 3 quarters of 2021 (1/1/21 - 3/31/21; 4/1/21 - 6/30/21; 7/1/21 - 9/30/21)
      • 70% of qualified wages of up to $10,000 EACH QUARTER (per employee, maximum credit of up to $7,000 per employee PER QUARTER)
• Consolidated Appropriations Act (CAA)
  • This Act allows employers who received a PPP Loan (forgiven) to still qualify for the ERC for any wages not paid with proceeds from the forgiven portion of the PPP Loan

Refunds are still available by filing of amended forms 941 (3 year statute)

For more information visit www.irs.gov/newsroom/new-law-extends-covid-tax-credit-for-employers-who-keep-workers-on-payroll