Expanded Eligibility for the Employee Retention Credit

The Consolidated Appropriations Act, 2021 (“the Act”) was signed into law in the final days of 2020. The legislation combined $900 billion in pandemic relief funds with a $1.4 trillion omnibus spending bill for the 2021 fiscal year. Among its many provisions, the Act significantly expanded employer eligibility for the Employee Retention Credit in 2020 and the credits available for the first two quarters of 2021.

The credit rate for the first two quarters increased from 50% to 70% of qualified wages. Further, the limit on per-employee wages was modified to $10,000 per quarter, rather than per year. Under the Act, employers can receive a maximum credit of $14,000 per employee for the first two quarters of 2021.

Employers who received a PPP loan can now retroactively apply for the Employee Retention Credit if they meet the new eligibility requirements. PPP loan recipients had been ineligible for the Employee Retention Credit before passage of this legislation.

For the first two quarters of 2021, employers can be automatically eligible for the Employee Retention Credit if gross receipts have declined at least 20% compared to the corresponding quarter in 2019. Further, employers who are impacted by a government shutdown order (full or partial) are eligible for the credit even if they do not meet the gross receipts test.

Schreiber Accounting and Advisory can help you understand and file for the Employee Retention Credit and get your maximum credit possible. The firm offers comprehensive tax compliance and tax planning services as well as payroll processing within Virtual CFO services. Contact the firm for more information.

Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice. Not all taxpayers will receive a refund.