The IRS recently issued an Employee Retention Credit (ERC) – 2020 vs 2021 Comparison Chart of the evolution of the ERC from its initial rollout in the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 to the various amendments that occurred in the Taxpayer Certainty and Disaster Relief Act (Relief Act), the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act.
What is the Employee Retention Credit?
The ERC is a refundable tax credit put in place to help businesses retain employees during the COVID-19 pandemic. The ERC was amended several times, most notably raising the full-time employees threshold, allowing organizations that received the Paycheck Protection Program (PPP) loan to be eligible for the ERC and extending the credit in 2021.
In simplistic terms, under the current rules, organizations could qualify if they have less than 500 full-time employees and had a reduction in revenue or were impacted by a government shutdown order or mandate. If an organization received the PPP loan, they are eligible to use wages not used as part of the PPP forgiveness calculation to calculate for the ERC.
There are many factors that go into determining eligibility for the ERC, and we recommend speaking with an advisor to determine whether or not you should apply for the Credit.
Why Are We Still Talking About the Employee Retention Credit?
There is still time to apply for the ERC. Many organizations have disqualified themselves without speaking to an advisor for various reasons; however, in some cases, those reasons won’t disqualify an organization from the ERC. For example:
- Some organizations believe that having received a PPP loan makes the organization ineligible for the ERC, which was the case when this credit was first implemented in the CARES Act. However, that was one of the many changes to the eligibility requirements, and if you received the PPP loan, you are still able to get the credit for wages not used in the PPP loan forgiveness calculation.
- Some believe that if they had a good year, they did not need to apply for the credit; however, if there was not a revenue drop, an organization could still qualify if they were affected by any government mandated shutdowns.
We have helped our clients receive approximately $16 million in ERC funding. If you would like to learn more about or discuss the Employee Retention Credit, contact a BSSF advisor today.