Can You Claim the Employee Retention Credit?

Are you a business that experienced a decline in 2020 and/or 2021 revenue compared to the same period in 2019, or had a mandated partial or full shutdown of operations? Are you aware you can qualify for the Employee Retention Tax Credit (ERTC) even if you took a Paycheck Protection Program loan?

The rules regarding who qualifies are different for 2020 and 2021, so many who couldn’t originally benefit from the ERTC now can.  Read below to learn the rules and how to claim the credit.

2020 Guidelines:

Eligibility – Employers whose business was fully or partially suspended due to emergency orders from a government authority that limited commerce, travel, or group meetings OR who had at least a 50% reduction in gross receipts for a quarter in 2020 compared to the same period in 2019.

Employees – Employers with under 100 full-time workers can claim the credit for wages paid to all employees. Those with more than 100 full-time workers can only claim the credit for wages paid to employees for the period they weren’t providing service.

Calculation – The credit is equal to 50% of the qualified wages paid to an employee between March 13 and December 31, 2020 up to a total of $10,000 for all quarters per employee.

2021 Guidelines:

Eligibility - Employers whose business was fully or partially suspended OR had at least a 20% reduction of gross receipts for the current calendar quarter compared to the same quarter in 2019.

Employees – Those with under 500 full-time workers can claim the credit for all wages paid to employees while those with more can claim the credit only for wages paid to those not providing services.

Calculation – The credit is equal to 70% of qualified wages paid after December 31, 2020 up to $10,000 per quarter per employee.

Besides determining qualified wages, you may also include health plan expenses incurred by the employer. However, you can not use health care expenses or wages use to apply for PPP forgiveness.

To claim the credit from past periods, complete a 941-X form for each quarter in which you qualify. For the current quarter, you may reduce your federal tax liability up to the amount of the credit you have available from the ERTC in that period.

 This can be quite confusing. If you have questions or need assistance, please contact me at 310-534-5577 or contact@abandp.com.