Employee retention credit

More Covid Relief in Addition to PPP for eligible businesses

The Second Coronavirus stimulus bill passed on December 27th and had several areas of relief for businesses.  The new law contains significant enhancements to the Employee Retention Credit (“ERC”) enacted under the CARES Act last year that provides significant assistance to eligible businesses affected by Covid-19.  We can help you determine eligibility and calculate the credit.

ERC Credit Amount and Applicable Period

The ERC is now applicable to wages paid from March 12, 2020 through June 30, 2021. For wages in 2020, the ERC is equal to 50% of the qualified wages paid to an employee, up to a maximum of $5,000 credit per employee for all of 2020. For 2021, the ERC is increased to 70% of qualified wages paid to an employee, up to a maximum of $7,000 credit per employee per quarter, for a total of $14,000. In total, companies could receive as much as $19,000 per employee for 2020 and 2021.

ERC coordination with PPP Loans

An ERC cannot be claimed based on wages paid with a PPP loan that has or will be forgiven.  If wages in excess of the forgiven amount are paid, the ERC can be calculated on those wages.  Just having a PPP loan no longer disqualifies you from qualifying for the ERC, as the original CARES act stated.  This change is retroactive to March 12, 2020.

ERC Eligibility

1Q-3Q 2020 - employers are eligible for the ERC in the first quarter their gross receipts were reduced by 50% compared to their gross receipts in the same quarter in 2019 OR if they had operations that were either fully or partially suspended by a government order related to COVID-19.

Q1 - Q2 2021 - employers are eligible for the ERC in either quarter if their gross receipts were reduced by 20% compared to their gross receipts in the same quarter in 2019 (or if gross receipts for the prior quarter were reduced by 20%  compared to the corresponding quarter in 2019) OR if they had operations that were either fully or partially suspended by a government order related to COVID-19.

There are many other caveats and nuances to the calculation and eligibility for the ERC. Credits may begin and end in different quarters based on changes in revenue, and there are other employee level limitations that vary by year.  It’s possible to qualify for some quarters even though other quarters may have shown growth.

If this is something that you believe your business may qualify for, please reach out to one of our team members so we can start the process.