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Employee Retention Credit (Redux)

In March of 2020, the Employee Retention Credit was created as part of the CARES Act.  When written into law, this credit was not available to employers who received PPP funds.  Congress recently passed the Consolidated Appropriations Act, 2021 (CAA).  Now, companies that receive PPP loans may qualify for the ERC (for wages that are not paid with forgiven PPP proceeds).

Under the CAA, the ERC is available for certain employers for the first two quarters of 2021.  In addition to the extension of the credit, the maximum amount has been significantly increased. 

The key points of the CAA are:

  • Maximum credit amount has been increased to $7,000 per employee per quarter for the first two quarters of 2021 (70% of the first 10,000 in wages per quarter). The maximum credit for 2021 is $14,000 as opposed to $5,000 in 2020.  Please click here for more details.
  • Eligibility has been expanded.  Under the original CARES Act, if gross receipts in a calendar quarter are below 50% of gross receipts when compared to the same calendar quarter in 2019, an employer would qualify.  Under the new law, beginning in 2021, businesses must be impacted by forced closures or quarantines and have seen more than 20% drop in gross receipts in the quarter compared to the same quarter in 2019.  Please click here for more details.

Please let us know right away if you qualify for the ERC for 2021 and would like to take advantage of this opportunity.  We can start calculating the credit immediately.  We can make the calculation retroactive to January 1.  The credit is claimed on your quarterly 941 form which will be prepared by Payroll Solutions. 

On March 1, 2021, the IRS issued Notice 2021-20 that provides guidance for employers claiming the ERC for 2020.  However, the notice only provides guidance for the credit as it applies to qualified wages paid between March 12, 2020 and before Jan. 1, 2021. 

If you now qualify for this credit for 2020 and would like to have the it calculated retroactively, please let your Payroll Specialist know.

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