Significant Changes for 2021
The Consolidated Appropriations Act signed into law by President Trump on December 27, 2020, makes significant changes to the employee retention credit for 2021.
New guidance measures were issued January 19, 2021 on how to claim the credit for the retroactive measures and for advance payments for the new provisions in 2021. Forms for this credit have not been finalized as of January 20, 2021.
We are currently reviewing the guidance measures issued to help limit the taxes our clients pay and to ensure that our clients received the full benefits of this act.
High-level Overview of the ERC
Beginning on January 1, 2021, and through June 30, 2021
ERC was extended and is available for qualified wages paid between March 13, 2020 and July 1, 2021.
Eligible employers may now take an immediate and refundable credit against the employer portion of their Social Security payroll tax equal to 70% of qualified wages.
The maximum credit available per employee increased from $5,000 per/quarter to $7,000 per quarter for all qualified wages paid during 2021.
The threshold was raised from 100 to 500 full-time employees.
Qualified wages for eligible employers who average 500 or less full-time employees are now wages paid to employees, regardless of whether the employees are working.
Qualified wages for eligible employers who averaged more than 500 full-time employees are wages paid to employees who are not working.
Employers are eligible for the ERC in 2021, if business operations are either:
Fully or partially suspended by a COVID-19 lockdown order, or
For a quarter in 2021, gross receipts are less than 80% of gross receipts for the same quarter in 2019.
Employers who took a PPP loan are no longer prohibited from claiming the employee retention credit. However, an employee retention credit may not be claimed for wages paid with the proceeds of a forgiven PPP loan.