NEW Employee Retention Tax Credit
I just wanted to take a few minutes to update everyone on an important tax opportunity called the Employee Retention Tax Credit. It can save you significant amounts of money if your business qualifies. The tax law introduced last spring created the credit, but many companies didn’t qualify because they had borrowed PPP money. However, with the latest tax law passed in December 2020, that restriction has been removed – so you can get it if you had a PPP loan. (The new law says you won’t be able to count payroll paid with PPP money towards the credit).
Here are a few of the highlights:
1. 50% Tax Credit
For wages paid from 3/13/20 to 12/31/20 – the credit is 50% of qualifying wages up to $10,000 per year per employee –max of $5,000 per employee for 2020
2. 70% Tax Credit
For wages paid from 1/1/21 to 6/30/21, the credit is 70% of qualifying wages up to $10,000 per quarter per employee –max of $7,000 per quarter per employee for the first two quarters of 2021
3. Eligible businesses are:
- 2020 – Businesses with a drop in gross receipts of greater than 50% from the same quarter in 2019
- 2021 – Businesses with a decline in gross receipts of greater than 20% from the same quarter in 2019
- Any business that had a full or partial suspension due to an order from a government authority limiting commerce, travel, or group meetings
4. My business has received a PPP loan.
If your business qualifies and has a PPP loan, then what I am hearing from the classes I have attended is that there can be ways to allocate the amounts of payroll costs that you apply toward PPP loan forgiveness to maximize this credit
5. I have NOT applied for a PPP loan.
If you have not applied for PPP loan forgiveness yet, I strongly suggest you hold off until you can evaluate how to allocate the wages between the PPP loan forgiveness and the Employee Retention Tax Credit to maximize the credit
6. I have applied but not received a PPP loan.
If you have applied for PPP loan forgiveness but haven’t had it processed yet, I strongly suggest you contact your PPP lender and ask them to withdraw the request until the interaction with the Employee Retention Tax Credit can be evaluated
7. I have received a PPP loan that has been forgiven,
If you have applied and already had your PPP loan forgiven, there may still be ways to maximize the credit best
The Employee Retention Tax Credit is a very complicated area. I have already taken two classes on this issue and had other team members take another course on this as we feel that some of our clients and prospective clients can benefit from these credits. We are in the process of putting together more information and a method of calculating this credit and will reach out to you at that time.
Let me know if you feel your business may qualify, and we will be sure to reach out to you when we complete our evaluation of the credit.