To Our Valued Business Clients:

The Employee Retention Credit signed under the CARES Act in 2020, is a refundable credit that businesses can use to pay for qualifying wages paid to employees including certain types of health insurance costs. In 2020, employers who received a loan from the PPP loan program are also eligible to receive the Employee Retention Credit for their employees; however, PPP loan funds used to pay wages are not eligible wages for the Employee Retention Credit. A credit can be claimed of up to $10,000 per employee against 50 percent of the annual wages paid to employees between March 13th, 2020 and December 31st, 2020.
The IRS increased the credit claimed to 70 percent of qualifying wages paid under the Consolidated Appropriations Act in 2021. Qualifying wages do not include wages paid to related individuals to a majority owner or wages paid to the majority owner(s). The attribution rules must be applied to assess whether the owner or spouse‚Äôs wages can be include for the ERTC. Employers who qualified in the first two quarters of 2021, could claim up to $10,000 in qualified wages per employee per quarter. The program ended for most businesses on September 30th, 2021. For the third quarter of 2021, the credit remained at 70 percent of wages up to $10,000 per employee per quarter or up to a maximum of $21,000 in credits per employee for 2021.
For the third and fourth quarter of 2021, the Recovery Startup Business program was added. However, limited businesses qualify for this credit. Those who qualify for this credit must have begun operations after February 15, 2020; have annual gross receipts under $1 million; and not be eligible for the Employee Retention Credit in previous quarters. The credit for the Recovery Startup Business goes up to $50,000.
Qualifying businesses include those in which had operation partially or fully suspended due to COVID-19 governmental restrictions. To calculate businesses with declining gross receipts in the first quarter of 2020, you will need to compare to the gross receipts of the same quarter in 2019. If gross receipts declined by at least 50 percent, then that business qualifies for the Employee Retention Credit. In 2021, the percentages changed to a 20 percent decline compared to the same quarter in 2019. If you started a business at any time in 2019, you will take the quarter in which the business started operations as the base period for comparison to quarters in 2020 and 2021. Employers that started a business later in a quarter, will have to estimate the gross receipts they would have had. The credit can be claimed retroactively. In order to do so, employers will need to file a form 941-X to amend for the qualifying quarters. Your payroll company can process the amended payroll forms. Please reach out to us if you need help determining if you qualify for the ERTC and the amount you are eligible to receive in tax credits.