The Employee Retention Credit is a fully refundable tax credit for employers based on qualified wages that Eligible Employers pay their employees (wages paid after March 12, 2020 through December 31, 2020 CARES ACT and January 1, 2021 through June 30, 2021 CAA 2021).
This credit can be as much as $5,000 per employee for 2020 and $14,000 per employee for the 1st and 2nd quarter of 2021. That is a total of $19,000 per employee for both 2020 and 2021 if you qualify. Please note that this will reduce the amount you are able to deduct for payroll taxes, however, I would rather have a $1 deposited than a $1 deducted.
Originally you could not take a PPP loan and use ERC. However, this was changed with the Consolidated Appropriations Act of 2021. You can now qualify for this credit even if you had a PPP loan.
I went back and forth thinking of how to put this notification together. Knowing that my clients and friends needed to know about this, and yet, the complexity of the issue, made it difficult to come up with a middle ground where it would be easily understood. I hope that I have been able to do this; if not, and you still have further questions, please email us at ERC@estesscpa.com.
First off, do you qualify after the changes?
This is important because when the ERC first came out last Summer, if you had received a PPP loan, you automatically did not qualify. Currently, if you had other wages not used for PPPforgiveness, you can also qualify for these credits.
You qualify for these credits if you satisfy one of the following criteria:
A. Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, group meetings due to COVID-19.
- Those businesses considered essential, do not qualify, unless they have supply of critical material/goods disrupted in a manner that affects their ability to continue to operate
- Businesses shuttered but able to continue their operations through telework do not qualify
- Voluntary shutdown to protect employees with no government order does not qualify
- If government order requires you to reduce your hours, you qualify, or,
B. Experience a significant decline in gross receipts during the calendar quarter.
- 2020 – Quarterly revenue is less than 50% of the previous years quarter. Continues to qualify until revenue is more than 80% of previous year’s quarter.
- 2021 – Quarterly Revenue is less than 80% of the previous year’s quarter.
- Determining this can be very complicated. If you have additional questions, please send us a quick email and we can address your specific situation.
On March 22, 2020, Governor Edwards issued a stay at home order directing all non-essential residents to shelter at home and limit movements outside of their homes. This order was extended through May 15, 2020. Here is a link to the stay at home order. This order affected many businesses directly and indirectly.
Certain businesses were completely shut down by this order. Others, were simply affected, or partially shutdown. The new requirement states that: ”An employer whose trade or business operations are fully or partially suspended during a calendar quarter due to a governmental order is an Eligible Employer that may be entitled to the Employee Retention Credit.” It is very difficult to make this determination when the IRS website is not even updated with the most current information form the Taxpayer Certainty and Disaster Tax Relief Act of 2020. A partial suspension of operations could be a simple as not able to obtain the proper supplies to operate at full capacity. The variations of this definition could go on into infinity. How does it affect you?
This must be carefully planned and calculated so that it blends well with your PPP payroll expenses to maximize the credit and PPP forgiveness. Please email us if you need help. Like the PPP process, and as required by my insurance carrier, this is a separate engagement and must be treated accordingly.
By using Estess CPAs tax filing service will help ensure that your tax return is filed accurately and timely. If you remain current with your tax filings, you will unlikely be the victim of an IRS phone scam. We specialize in helping businesses save time and money. In addition to providing bookkeeping, payroll, and accounting services, we are here to advise you and help you succeed. Call us today and schedule an appointment at our Belle Chasse or Luling offices:
7822 Highway 23 128 Lakewood Drive
Belle Chasse, LA 70037 Luling, LA 70070
(504) 433-5122 (985) 785-1470