In 2020, when Congress passed the CARES Act, they provided a refundable payroll tax credit for 50% of qualified wages and allocable health plan costs called the Employee Retention Credit (ERC). For 2020 the maximum credit was $5,000 per employee. Unfortunately, when originally passed, the ERC was not initially available to employers receiving Paycheck Protection Program (PPP) loans.
However, with passage of the Consolidated Appropriations Act of 2021 (CAA) and American Rescue Plan Act (ARPA), Congress extended the ERC until December 31, 2021. In addition, the maximum credit is now more generous at $7,000 for each employee per calendar quarter in 2021 (for a maximum total of $28,000 per employee). In addition, the CAA retroactively amended the law to permit an employer that received a PPP loan to be eligible to claim an ERC.
Qualification for the 2021 ERC is determined on a quarterly basis. If your business had a reduction in gross receipts of 20% or more, compared to the same quarter in 2019, you may qualify for the ERC. Or, if your business was partially or completely shut down by the government, you may qualify for the ERC. Only one of these two thresholds needs to be met for qualification.
If you believe you may qualify for this valuable credit, please contact Becky Howell in our Client Accounting Services Department for additional assistance. Becky can be reached at 630-653-1616, ext. 481 or by email at email@example.com.