Update on Employee Retention Credit

On December 27, 2020, a new stimulus bill (the Consolidated Appropriations Act, 2021) was signed into law adding potential savings for millions. The Act includes changing the eligibility of the Employee Retention Credit (ERC).

Under the CARES Act, passed in March 2020, Congress generated two incentives, the PPP Loan and the ERC, that would provide potential funds to business owners designed to assist them in keeping employees on staff throughout the Coronavirus Pandemic. However, the aforementioned Act did not allow businesses to take advantage of the ERC it they took advantage of the PPP loan. The Consolidated Appropriations Act, 2021, removed the restriction, and is allowing businesses to take advantage of both incentives.

The ERC is a refundable payroll tax credit that is only available to businesses (for-profit or tax-exempt organization) who either:

  1. Had their business fully or partially suspended during at least one quarter in 2020 as directed by government mandate (Healthcare Operations were NOT mandated to be suspended), OR
  2. Experienced a large drop in year-over-year gross receipts (for any quarter in 2020, the gross receipts/collections/production must be less than 50% of what they were for the same quarter in 2019).

If the business meets one of the above criteria, the business may be eligible to claim a refundable payroll tax credit of up to $5,000 per employee for wages paid between March 12 and December 31, 2020, with some limits. For additional information and FAQs regarding the ERC, please visit this link.

If you meet one of the above criteria, please reach out to us to determine if you are eligible for a refundable payroll tax credit.

Robert (Bob) Schmidt, CPA

Principal at BWTP, P.C. Read Bob’s bio here.

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