Employee Retention Credit Program

We want to share the latest information about the Employee Retention Credit Program!

Please let us know if you have any questions or need assistance. We can work with you to see if you qualify! Feel free to reach out to us through our website or by emailing us directly at: amys@imsbusiness.net

The Consolidated Appropriations Act, 2021 expanded the Employee Retention Credit (ERC) originally made available under the CARES Act. While much of the focus of recent legislation has been on the PPP loan program, the newly expanded eligibility rules of the ERC have made it more attractive and available to many more small businesses than it previously was.

Originally the CARES Act stated the ERC could not be taken by any company who received PPP Funding, but that has been modified to say they just can't use them for the same wages covered by the PPP funds (and this change is retroactive to the date of the CARES Act!). It also reduced the revenue reduction threshold that must be met to be eligible as well as increased the amount of the potential credit for 2021 (now up to $7,000 per employee per quarter) through June 30, 2021.

Below is a summary of the revised guidance.

Employee retention tax credit modifications: The bill extends the CARES Act employee retention tax credit (ERTC) through June 30, 2021. It also expands the ERTC and contains technical corrections. The expansions of the credit include:

  • An increase in the credit rate from 50% to 70% of qualified wages;

  • An increase in the limit on per employee creditable wages from $10,000 for the year to $10,000 for each quarter;

  • A reduction in the required year-over-year gross receipts decline from 50% to 20%;

  • A safe harbor allowing employers to use prior-quarter gross receipts to determine eligibility;

  • A provision to allow certain governmental employers to claim the credit;

  • An increase from 100 to 500 in the number of employees counted when determining the relevant qualified wage base; and

  • Rules allowing new employers who were not in existence for all or part of 2019 to be able to claim the credit.

The bill also (retroactive to the effective date of the CARES Act):

  • Provides that employers who receive PPP loans may still qualify for the ERTC with respect to wages that are not paid with forgiven PPP proceeds;

  • Clarifies the determination of gross receipts for certain tax-exempt organizations; and

  • Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee, consistent with IRS guidance.

Please note additional guidance and clarifications on this new law are continuously being updated and expanded. Because businesses are now eligible to use both the PPP and ERC, it may be necessary to do some analysis on how they can best be utilized together. Therefore, we encourage you to reach out to us if you have any questions regarding eligibility or potential available savings/credits you may be eligible for.

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