The Employee Retention Tax Credit (ERC) was enacted as part of the CARES Act and is a refundable tax credit against an employer’s share of FICA taxes. It was designed to reward those companies who kept employees on payroll in 2020.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTRA), part of the Consolidated Appropriates Act of 2021 (CAA 2021) was signed into law on December 27, 2020, and amended and extended the ERC and the availability of certain advance payments of the tax credits.
Here are some resources to help you determine if you qualify for the credit:
Below are the details of the changes to the ERC in Sections 206 and 207 of the TCDTRA.
The law revises who may claim the ERC for the period after March 12, 2020 and before January 1, 2021. It does not change the calculation of the credit for that time period. Section 206 also provides some clarity on certain ERC provisions.
For the 2020 tax year, the TCDTRA, retroactive to the effective date of the CARES Act, does the following:
Provides that employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERC with respect to wages that are not paid with forgiven PPP proceeds;
Clarifies the determination of gross receipts for certain tax-exempt organizations; and
Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee, consistent with IRS guidance.
The TCDTRA extends the ERC, which was originally scheduled to expire at the end of 2020, until June 30, 2021. More significantly, this Section of the Act modifies the calculation of the ERC for the first six months of 2021.
For January 1, 2021 through June 30, 2021, the modification of the credit includes:
An increase in the credit rate from 50% to 70% of qualified wages;
An increase in the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter;
A reduction in the required year-over-year gross receipts decline from 50% to 20%;
A safe harbor allowing employers to use prior-quarter gross receipts to determine eligibility;
A provision to allow certain governmental employers to claim the credit;
An increase from 100 to 500 in the number of employees counted when determining the relevant qualified wage base; and
Rules allowing new employers who were not in existence for all or part of 2019 to be able to claim the credit.
What you need to do to Claim the Credit:
Our tax department is working hard to help our clients claim the ERC for 2020. If you are interested in claiming the credit, please fill out and submit the ERC Worksheet below. To fill out the form you will need:
The Qualified Wage amount for every quarter you want to claim the credit
The Qualified ER Health Plan Expenses for every quarter you want to claim the credit
To sign the statement acknowledging you want to retroactively claim the ERC for 2020 and accept the associated fees ($200 per quarter, $100 per amended return, the cost of a regular payroll)
Your request will be entered in our tax department's queue and amended returns will be filed in the order the requests are received.
Please note: We are waiting currently getting set up to process the ERC for 2021. We expect most of the requests to claim the ERC for 2021 to come after the end of Q1 2021, as this is when our clients will best be able to tell if they have qualified wages. We will keep you updated on when we will be ready to process these credits.
If you have any questions, please reach out to your Client Care Team Leader or call our office at (616) 791-7900.
Thank you for your continued confidence in our company! As always, we appreciate your business.
FLEXCHECKS, INC., 2930 Three Mile Rd. NW, PO Box 141512, Grand Rapids, MI 49514