In March 2020, Congress passed the CARES Act which included the Employee Retention Credit (ERC) to help businesses keep employees on the payroll throughout the pandemic. This credit could be claimed on an employer’s payroll tax return. When the CARES Act was originally enacted, businesses that received a forgivable loan under the Paycheck Protection Program (PPP) were not eligible to claim the credit.
Changes in legislation through the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act have allowed businesses to take advantage of both the PPP and the ERC. Additionally, the program has been extended through the end of 2021, employers can claim the credit retroactively, and the amount of potential benefit has also been increased. Employers that did not originally qualify for the ERC should consider these changes.
There are specific criteria and limitations to qualify for the credit. Employers must meet one of two requirements:
1. Operations were fully or partially suspended due to COVID‐19 related government order limiting commerce, travel or other group meetings due to COVID‐19, OR
2. Has had a significant decline in gross receipts. The period for which an employer is considered to have a significant decline in gross receipts begins with the first calendar quarter in 2020 for which gross receipts were less than 50% of gross receipts from the same calendar quarter in 2019 and ending either the earlier of January 1, 2021 or the first calendar quarter in which gross receipts are greater than 80% for the same calendar quarter in 2019.
The period for which an employer is considered to have a significant decline in gross receipts begins with the first calendar quarter in 2021 for which gross receipts were less than 80% of gross receipts from the same calendar quarter in 2019 and ending the first calendar quarter in which gross receipts are greater than 80% for the same calendar quarter in 2019. In 2021, employers can elect to apply the gross receipts test using gross receipts for the prior calendar quarter compared to the corresponding calendar quarter in 2019.
Click here to view our ERC Guide to assist in understanding the eligibility requirements of the Employee Retention Credit. If you believe that your business may be eligible for the Employee Retention Credit for either 2020 or 2021, contact our tax professionals today at 315.424.1120 or email@example.com for more information.
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