» Employee retention credit

Employee Retention Credit: New Law Clarifies and Broadens Credit Qualifications

The Employee Retention Tax Credit (ERTC) was created as part of the CARES Act to encourage businesses to continue paying employees by providing a credit to the eligible employer for wages paid to eligible employees.

New Legislation Effective January 1, 2021, created under the Consolidated Appropriations Act, which was signed into law December 27, 2020, clarifies and broadens the applications of the Employee Retention Credit.

Recent changes extended the credit through December 31, 2021 and allow for the ERTC to be used by companies that received PPP loans. Originally when the Employee Retention Credit was introduced along with the Paycheck Protection Program, employers were forced to choose between the two.

The credit is now not only significantly more available, but significantly more valuable to American businesses.

Here is the breakdown:

Up to $5,000 per employee per year in 2020 (50% of wages up to $10,000)

Up to $7,000 per employee per quarter in 2021 (70% of wages up to $10,000)

What can be Challenging?

The challenge many employers will face is not knowing whether they qualify, but rather maximizing their qualified credits. Calculating the maximum credit you or your client are entitled to requires an expert knowledge of the Consolidated Appropriations Act as well as an expert team to make the claiming process effortless.

Our experts are available to help you manage changes to the CARES Act and calculate exactly how much credit you (or your client) are eligible to claim.

Eligible Employer

An Eligible Employer (including all members of a control group) must meet one of the following:

CRITERIA

Full or Partial Suspension

Have their operations fully or partially suspended due to orders from a governmental authority.
Decline in Gross Revenue

Suffer a significant decline in quarterly gross revenue as measured against 2019 (50% decline for 2020; 20% decline for 2021)

How it works?

Determine if the employer qualifies, and if so, for which quarters
Determine which employee wages qualify
Calculate credits, including estimates for current and future quarters
Prepare form 7200 for employer to submit to IRS to receive advances
After the quarter has ended, calculate the actual credits earned
Reconcile actual credits with advance credits requested
Prepare reconciled data for Form 941-X

Many of our clients didn’t realize they qualified until we had an informational call.

Reach out to our tax credit team to ensure you are in compliance and get the maximum credit available based on your qualified employees.