Employee Retention Credit (ERC)

ERC Employee Retention Credit Extension

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• Now in addition to PPP
• Can’t use the same wages though
• Extended through 6/30/21
• Refundable payroll tax credit reported on 941
• Different rules for 2020 and 2021
• Eligibility by quarter using the Shutdown test or Reduction in Revenue

2020

• 1. • 50% of wages up to $5K per employee per year
     • Only the first $10K of payments to each employee matters
     • If over 100 employees, you can only use wages paid to employees who are not working

2021

• 1. • 70% of wages up to $7K per employee per quarter
     • Only the first $10K of payments to each employee matters
     • If over 500 employees, you can only use wages paid to employees who are not working

Shutdown test

Operations are fully or partially suspended during a calendar quarter due to “orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes)” due to COVID-19.  For details about scenarios that qualify, please see the IRS page.

Gross Receipts Test

2020:  Starts with a 50% decline in receipts from the same quarter in 2019 to 2020.  Continues as long as you remain in a 20% decline, plus one more quarter

2021:  Must have a 20% decline compared to 2019 or if you didn’t pass this test, you can still pass if the preceding quarter had a 20% reduction.

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Example of how powerful the ERC can be:

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