ERC Tax Credit
Assisting economically impacted companies to keep employees on the payroll
What is the Employee Retention Credit?
The CARES Act introduced the latest ERC to encourage companies to maintain their payroll. This ERC is a refundable credit that businesses can claim on qualified wages paid to employees during 2020 and 2021.
In 2020, it entitled employers to a 50% credit (maximum of $5,000 per employee) of the qualified wages paid to employees. This amount increased to 70% (maximum of $7,000 per employee, per quarter) for 2021 with the American Rescue Plan Act (ARPA).
Under the recently enacted American Rescue Plan Act On March 11, 2021, the President signed the $1.9 trillion American Rescue Plan Act of 2021 (ARPA) into law. This is the 6th bill enacted by the federal government that focuses on COVID relief. One provision of this act allows for expanded Employee Retention Credits. Relief from this bill impacts both businesses and individuals and provides for stimulus payments, tax relief, additional funding for existing programs like the PPP, assistance for state and local governments, and funds to aid in coronavirus testing and vaccination distribution. (ARPA – Mar.2021) and previously under the Consolidated Appropriations Act, 2021, the employee retention credit, a provision of the CARES Act, is extended and expanded. With the signing of the Infrastructure Bill in November 2021, the ERC program was cancelled for Q4 of 2021. The ERC can be claimed through September 30, 2021 by eligible employers who retained employees.
New Opportunities with 2021 ERC
| 2020 | 2021 | |
| FULL-TIME EMPLOYEE LIMITATION | < 100 FTEs | < 500 FTEs |
| Credit Amount | 50% credit on first $10,000 of wages | 70% credit on first $10,000 of wages each quarter |
| Maximum Credit allowed per employee | $5,000 | $21,000 |
| DECLINE IN GROSS RECEIPTS THRESHOLD | 50% or greater relative to same quarter in 2019 | 20% or greater relative to same quarter in 2019 or relative to the prior calendar quarter |
Am I eligible for the Employee Retention Tax Credit?
| 2020 | 2021 |
| the ERC requires a 50% or greater decline in gross receipts to the comparable quarter in 2019 | the ERC requires a 20% or greater decline in gross receipts to the comparable quarter in 2019 |
Many employers, including not-for-profits, qualify for the ERC. Eligibility is determined on a quarter-by-quarter basis. To be eligible the employer has to show they either:
- Suspended operations fully or partially due to an official COVID-19-related shut down order
- Experienced a significant decline in gross receipts relative to the same quarter of 2019 (for 2021, the significant decline in gross receipts can also be measured by comparison to the prior calendar quarter)
OR
For 2020 and 2021 Employers that received a Paycheck Protection Program (“PPP”) loan may still be able to claim the ERC. (the two benefits cannot be related to the same wages)
What is the Tax Credit Amount?
For 2021, you can receive 70% of the first $10,000 of Qualified Wages paid per employee in each of the first 3 quarters in 2021. The maximum ERC for each quarter is $7,000 per employee. The maximum ERC for 2021 is $21,000 per employee.
Source Advisors takes a thorough and comprehensive approach to evaluating and documenting your companies ERC credits. ERC technical leaders are available to help you navigate the nuances of the employee retention tax credit. This assessment is complimentary. We get paid only if your company moves forward in successfully claiming the ERC. Our approach will provide the necessary documentation to properly claim and sustain the ERC credits you are due.