Employee Retention Credit

Originally enacted in March 2020 under the CARES Act, the Employee Retention Credit (ERC) was extended and expanded in December 2020 with the passage of the “Consolidated Appropriations Act, 2021” (CAA). The ERC is a refundable payroll tax credit taken on Form 941 for eligible employers impacted by the COVID-19 pandemic.

The ERC is now eligible for qualified wages, in excess of wages forgiven by PPP loan proceeds, paid from March 13, 2020, until June 30, 2021.

2020 Wages

• A 50% gross receipts decrease must be shown during a calendar quarter when compared to the same quarter in 2019
• The credit is capped at $5,000 per employee for the entire year
• If a business had more than 100 employees, only wages paid to employees not working were qualified wages
–  Controlled group and common control provisions apply
• For 2020 4th quarter, this credit could be claimed on a timely filed Form 941 (due February 1, 2021)
• For 2020 2nd and 3rd quarters, either amended Form 941s may be needed or a “catch-up” credit may be available on a timely filed 941
–  More IRS guidance is expected on this issue

2021 Q1 and Q2 Wages

• A 20% gross receipts decrease must be shown during a calendar quarter when compared to the same quarter in 2019
• The credit is capped at $14,000 per employee for the entire year ($7,000 per quarter)
• The ERC is available to businesses with less than 500 employees
–  Controlled group and common control provisions still apply
• For 2021 1st and 2nd quarters, this credit could be claimed on timely filed Form 941s

If you have additional questions, please reach out to your Wilkins Miller contact.