Employee Retention Tax Credit Could Put $$$ in Your Pocket!

By Kathy Bazan, BRC Consultant

January 17, 2021

When the Employee Retention Tax Credit (ERC) was included in the CARES Act last March, it was a boon to small business owners. In the latest stimulus package signed into law in late December, the ERC was improved. Here is a brief recap:

 

Feature 2020 ERC 2021 ERC
Covers 50% of qualified wages 70% of qualified wages
Covers per employee $10,000 of qualified wages per year $10,000 of qualified wages per quarter to 6/30/21
Credit per employee Up to $5,000   ($10K x 50%)

Up to $14,000

($20K x 70%)

Can you get PPP & ERC? Yes, retroactively YES!
Reduced year-over-year gross receipts decline by 50% 20%
Use prior-quarter gross receipts to determine eligibility? Yes Yes
How do you qualify for this credit?

·         Your business was partially or completely shut down by order.

·         Or your gross receipts declined by 50% when comparing a quarter of 2019 to same quarter in 2020.

·         You paid/will pay federal and state payroll taxes.

·         Your business was partially or completely shut down by order.

·         Or your gross receipts declined by 20% when comparing a quarter of 2019 to same quarter in 2020.

·         You paid/will pay federal and state payroll taxes.

 

If you have fewer than 100 employees, then the credit applies to all employee wages paid. If you have more than 100 full time employees, the rules are different.

To learn more and to calculate your ERC, click here: https://quickbooks.intuit.com/r/coronavirus/employee-retention-credit-calculator/#:~:text=The%20Employee%20Retention%20Credit%20is,employee%20during%202020%20is%20%245%2C000.

Source material for this article:

Carl Peterson, CPA, CGMA, Vice President — Small Firm Interests, Association of International Certified Professional Accountants, Plan for your clients to get both PPP loans and the ERC,” on AICPA.com (https://blog.aicpa.org/2021/01/plan-for-your-clients-to-get-both-ppp-loans-and-the-erc.html?fbclid=IwAR3ZJo1WpJYjXY_omN2lRj2gbkqhmYBPxoY-mYicruicpKrKqoD_nXgqTWs#sthash.v02kiQt4.dpbs)

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