Credit is significantly expanded.
The Consolidated Appropriations Act (CAA) passed December 27, 2020, makes major changes to the Employee Retention Credit (ERC).
The ERC is available on qualifying wages paid during the first two quarters of 2021 which meets the following test…
The Company has more than a 20% decline in gross revenue comparing the same quarter of 2021 to 2019.
For example, you would compare Quarter 2, 2021 revenue to Quarter 2, 2019, if that revenue declined by more than 20% the wages paid to employees in quarter 2, 2021 qualify for the credit.
The next test is that if an employer is over 500 full-time equivalent employees (as of 2019), then only wages paid to employees who are not working qualify.
If an employer is under 500 FTEs then all wages paid during the qualifying quarter count.
The last test is that these qualifying wages cannot also be used for other credits such as work opportunity credit, or family leave related to COVID, and these wages cannot be used for PPP loan forgiveness of round 2 PPP loans.
However, since the PPP loan maxes out using wages at 60% it seems like there should be plenty of wages to qualify for both.
The maximum credit for quarter 1 and quarter 2, 2021, is $7,000 per employee per quarter. The credit is claimed on Form 941 in the quarter the wages are paid.
There are also retroactive credits for 2020. Please see our website for additional information or contact us today to see if your Company qualifies for either 2020 or 2021 ERC.