Changes to the Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) was extended through December 31, 2021, with the passage of the American Rescue Plan in March; given the wind of Congress’ discussions, it seems unlikely that it will be extended further. However, employers can still take advantage of the ERTC, though they will want to act quickly.

If you did file in 2020 for the ERTC, you’ll need to note a few changes:

  • You are eligible this year, even if you received a PPP loan—and that eligibility is retroactive to March 12, 2020. Note, though, you cannot claim the ERTC on any wages that you used in calculating your PPP loan forgiveness. Other rules apply, including maximum credits, but you can amend last year’s tax returns to request a refund.
  • Qualifying is easier. The percentage of revenue decline required is now set at 20%, instead of the 50% required last year. Further, companies with 100 employees are now eligible (formerly 500) and the types of businesses eligible now include medical providers and universities. And “severely distressed” employers (those who had a 90% loss in gross receipts compared to 2019) can apply to take the ERTC for all wages paid to employees, regardless of number of employees.
  • The ERTC value is now 70% of qualified wages in 2021 (up from 50%), and the $10,000 annual eligible wage limit is now $10,000 quarterly.

If you didn’t file in 2020:

  • All of the above applies—yet while it’s easier to qualify, it can still be difficult to determine your eligibility, and the details required from coordinated payroll data can be a real headache. We strongly recommend getting support to get this data in place and apply before the end of the year.

If you need further support, please feel free to get in touch.

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