The Employee Retention Credit is a refundable payroll tax credit against certain employment taxes on “qualified wages”, as an incentive to retain workers during the pandemic. The passage of the Consolidated Appropriations Act of 2021 changed some of the provisions under CARES Act concerning the ERC. The following applies to wages paid from January 1, 2021 through June 30, 2021.
Who is eligible?
- Businesses that got partially or fully suspended by a COVID-19 lockdown order.
- Businesses that experience revenue decline of more than 20% compared to the same quarter in 2019. Businesses that were not in existence in 2019 can substitute 2020 for 2019.
What can I get?
Eligible employers can take an immediate and refundable credit against the employer portion of their Social Security payroll tax, equal to 70% of all qualified wages paid during 2021. The maximum credit available per employee is $7,000 per quarter.
What are “qualified wages”?
For qualified employers with 500 or less full-time employees, ALL employee wages can be qualified for the credit calculation, regardless of whether the employee is currently working. On the other hand, qualified wages for eligible employers who have more than 500 full-time employees are wages paid to employees who are not working.
Can I get both ETC and PPP?
Yes. Employers who receive PPP loans are no longer prohibited from getting ETC, given that you qualify for both. However, to avoid double-dipping, payroll costs for which an employer claims an ERC are not eligible to be forgiven in PPP, and the priority goes to the ERTC.
For more information about the Employee Retention Credit read our previous article https://levineandassoc.com/employee-retention-tax-credit-what-are-the-important-changes-for-2021/ or send us an email at josh@levineandassoc.com to book a non-commitment consultation with us for free.