New Provisions for the Employee Retention Tax Credit

Did you pay employees in 2020 or 2021 even though they were not performing services? You may be eligible for a maximum tax credit of $5,000 per employee in 2020 and $28,000 per employee in 2021.

What’s the latest on the Employee Retention Tax Credit?

The latest legislation, the Employee Retention Tax Credit (ERTC) now allows for retroactive amendments for this refundable tax credit. Originally the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) stated that you could not apply for the PPP loan AND claim the Employee Retention Tax Credit, but the Act was amended, and you can now qualify for both, as long as you do not double dip with the PPP (Payroll Protection Program) loan or the Families First Coronavirus Response Act (FFCRA) tax credits.

You may qualify for the credit for wages paid after March 12, 2020 if:

  • You are a nongovernment employer of 100 or fewer employees and were closed due to government orders
  • Or if you have reduction in gross receipts > 50% for the same period in 2019

As of January 1, 2021 you may qualify if:

  • You are a nongovernment employer of 500 or fewer employees and were closed due to government order
  • Or if you have a reduction in gross receipts > 20% for the same period in 2019

How much tax credit can we get?

The credit is for 50% of wages up to $10,000 paid after March 12, 2020, and 70% of wages up to $10,000 per quarter in 2021 for payments that were made to employees that were not performing services, including qualified health expenses. This does not include vacation or sick time, but clearly stated time to retain employees not eligible for any other payments.

With the expansion of the qualifications, the ability to file for the credit (even though a PPP loan was obtained), and the increase in the amount you can claim, this could add up to very large credits for many employers.

Businesses should contact their CPA to verify your eligibility for the ERTC, especially if you had a PPP loan. Also, be sure keep documents to prove your eligibility.

We are here to help

As always, Integrity Data continues to keep an eye on the latest news surrounding payroll. If you are a Dynamics GP or 365 Business Central user looking for tax filing services, you can learn more about our offerings here.