Government Tax Credits
In order to provide economic relief to businesses and individuals during the Coronavirus pandemic, the CARES (Coronavirus Aid, Relief and Economic Security) Act was signed into law in March 2020. This $370 billion stimulus package makes funding available to small companies, which can be used to allow certain employers who retain employees during the crisis, to claim a tax credit. This tax credit is known as the Employee Retention Credit (ERC).
Employee Retention Credit Details
The Employee Retention Credit (ERC) was created by Congress to help employers affected by the Covid-19 pandemic. The ERC is a refundable payroll tax credit.
2020: CARES Act
- March 13, 2020 – December 31, 2020.
50% of up to $10,000 qualified wages per year for full-time employees.
Maximum credit of $5,000 per employee.
Wages total cannot include those paid by forgiven PPP loan proceeds.
2021: Covid-19 Relief Package
- January 1, 2021 - December 31, 2021
70% of up to $10,000 qualified wages per quarter for all 2021 quarters
Maximum credit of $28,000 per employee
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How to Qualify
Two ways a business can qualify:
- A full or partial suspension of business operations as a result of government order.
Partial shutdown example – in-door dining was not allowed at a restaurant, but take-out was available
Full shutdown example – under the CA stay at home order, child day care centers were completely closed
- A significant decline in revenue compared to the same quarter in 2019
If an employer does not meet the revenue threshold, they may still qualify if they experienced either a partial or full shut-down of business operations.
Significant decline in revenue is defined as:
A 50% decline in revenues in any quarter compared to the same quarter in 2019
A 20% decline in revenues in any quarter compared to the same quarter in 2019
ERC ends when quarterly revenue in 2020 exceeds 80% for the same quarter in 2019.
Finances Made Simple
Employee Retention Credit Services
We handle all the necessary steps to access ERC:
Determine and document qualification for ERC
Calculate the ERC, including the forgiven PPP amount if applicable
File the relevant documents with the IRS
Defend claims if required by audit