The Employee Retention Tax Credit (ERTC) is a refundable payroll tax credit available to businesses and nonprofit organizations of all sizes. For calendar year 2020, the ERTC was available only those organizations and businesses which experienced a total or partial shutdown to comply with government orders in light of COVID or those businesses that saw a 50% reduction in gross receipts in any quarter of 2020 compared to the same quarter in 2019.
Initially, the ERTC was not available to those that participated in the Paycheck Protection Program (PPP), and the credit was worth $5,000 per eligible employee per year, resulting in savings by reducing payroll taxes. The credit can be claimed on all wages paid by an employer with 100 employees or fewer. For an employer with more than 100 employees, the credit was only on wages paid to non-working employees.
Things have changed, both retroactively and going forward into 2021.
New Opportunities in 2020
The Taxpayer Certainty and Disaster Relief Act passed at the end of 2020 may have qualified employers retroactively for the credit. The Act removed the restriction limiting the ERTC to employers who had not received a PPP loan. If you were subject to a governmental shutdown in 2020, or met the gross receipts test as described above, you can now receive the ERTC even though you also had a PPP loan.
New Opportunities in 2021
The same act also extends and expands the credit through June 30, 2021. For 2021, ERTC:
- is now extended through June 30, 2021;
- increased the per employee maximum, from $5,000 per employee in 2020 to $14,000 through June 30, 2021;
- allows for a credit to employers with 500 employees or fewer (previously 100) for wages paid to all employees who are working and non-working; and
- expands eligibility to those with a 20% reduction in gross receipts (down from the 50% threshold in 2020).
Selden Fox can provide an ERTC Review providing businesses an initial savings analysis for 2021, as well as any retroactive opportunities for 2020. We can compile the necessary documentation, prepare the appropriate filings or work with your payroll provider, and submit all the required forms to the IRS. To learn if you qualify for the ERTC, complete the form below, and we will follow up with you on next steps.