- Several overhauls from CARES Act—what are they and how can you benefit from them?
- Continued provisions—important factors still in play
- Does your business qualify? Find out below.
The passing of the Consolidated Appropriations Act (“CAA”) in December of 2020 has expanded and extended provisions for the Employee Retention Tax Credit (“ERC”). For the most part, any business that can demonstrate a significant impact from the government shutdown is eligible, while meeting other requirements. This credit is fully refundable based on qualified wages and certain health expenses.
On the whole, the CAA has largely expanded qualifications for the ERC making it more accessible to a wider range of employers still struggling from the pandemic.
These are the major changes to note:
- 70% of qualified wages eligible for an immediate refundable credit against the employer’s portion of the social security payroll tax.
- Maximum credit is $7K per employee on all qualified wages for each of the first two quarters of 2021—a total of $14K per employee.
- 500 employees is the new threshold.
- Gross receipts less than 80% compared to the same quarter of 2019 must be demonstrated.
- PPP loanees are now eligible. See below under “No double-dipping” for details.
Continued provisions to remember:
Employers with over 500 employees aren’t necessarily prohibited from the tax credit.
- They can still receive the tax credit if they have employees who are being paid but not yet working or if the business is functioning at a limited capacity.
- Employers who take the employee retention credit cannot take credit on those same qualified wages for paid family medical leave.
- Wages that are used and forgiven with a PPP loan are not eligible for the ERC.
Amending 2020 Payroll Tax to Optimize Funds:
In 2021, the maximum credit has been upped to $7K per employee on 70% of all qualified wages until July 1, 2021. Businesses have the potential to receive a maximum of $14K per employee for the first two quarters of 2021. However, with the $5K per employee max credit from 2020, employers can potentially get up to $19K in credit per employee between 2020 and 2021. There is an option to amend prior payroll tax filings from 2020 to regenerate such refunds.
DSJCPA is here for you. Our Coronavirus Response Team (CRT) is fully equipped to help you and your business overcome these struggles, together. Meet the team by visiting our website and give us a call at 516-541-6549 with your questions about ERC eligibility.
Associate, Creative Solutions
516-541-6549 | Email