In the American Rescue Plan Act signed into law by President Biden today, the employee retention credit (ERC) will be around much longer than its previous June 30, 2021 expiration date.
This refundable payroll tax credit is now available to eligible employers, including Paycheck Protection Program (PPP) borrowers, for all four quarters of 2021. With this change, the combined benefit of the 2020 and 2021 ERCs can total up to $33,000 per employee.
This total includes the up to $5,000 per employee ERC for qualifying 2020 wages under the CARES Act, and the up to $7,000 per employee ERC per quarter for 2021 wages.
Eligibility Requirements
The eligibility requirements for the 2021 ERC have not changed from those provided under the Consolidated Appropriations Act (CAA) in December. Generally, an employer must meet one of the following criteria:
- The employer’s business was fully or partially suspended by government order due to COVID-19 during the calendar quarter; or
- The employer’s gross receipts dropped below 80% (i.e.: experienced a 20% decline) of the comparable quarter in 2019.
Don’t Leave Money on the Table
This extension, along with the increased benefits under the CAA, have made the ERC a significant source of cash flow for your business or nonprofit. Depending on organization size, the credit may be available for wages paid to employees whether or not they provided services to their employer.
This immediate credit can bring timely financial relief to your organization. For more information on determining your eligibility, calculating your ERC and maximizing its value, contact your Grassi tax advisor.
