Employee Retention Tax Credits Available Thru December 2021

Tuesday, July 27, 2021

The American Rescue Plan Act signed in March extended the Employee Retention Tax Credit (ERTC) through December 2021, and made a number of related changes. The ERTC remains a key resource available to businesses seeking to recover from the effects of the COVID pandemic, potentially returning $28,000 per employee to qualifying employers for wages paid in 2021. The ERTC was also extended to new businesses, which started after February 15, 2020, with average annual receipts of under $1,000,000. For such businesses, the amount of the credit may not exceed $50,000 per quarter.

The Consolidated Appropriations Act (CAA) increased the value of the ERTC for wages paid from January 1, 2021 through June 30, 2021 to 70% (from 50%) of qualified wages, which were increased from $10,000 per year to $10,000 per quarter. Thus, the maximum credit per employee for wages paid between January and June 2021 is $14,000. The American Rescue Plan reaffirms the credit percentage remains 70% of up to $10,000 in qualified wages per employee per quarter; i.e., a $28,000 maximum credit per employee for 2021.

The CAA changing the 100-employee threshold to 500 for 2021 made it easier to qualify, as well. Employers became eligible in 2021 if they were able to demonstrate revenue declines of 20% (formerly 50%) to determine eligibility.

Legislation also enabled employers that received PPP loans to qualify for the ERTC as well. This provision was both effective in 2021 — and retroactive to March 2020. The maximum credit remains $5,000 per employee for 2020 while other limits in effect in 2020 continue to apply (e.g., revenue declines of 50% or more). Qualifying employers who received PPP loans in 2020 can amend their federal employment tax returns to request refunds for the ERTC.

More information on juggling both the PPP and ERTC HERE: https://www.fuoco.cpa/maximizi...

And HERE: https://www.fuoco.cpa/new-ppp-...

Contact Us: The information above should be evaluated to determine whether the ERTC may be available to an employer. Please consult with your Fuoco Group tax advisors to assess your situation and make sure you are taking advantage of all the tax credits and financial assistance available to you at this time.