Available for the 2020 – 2021 Tax Years
One of the most beneficial and underutilized tax credits introduced as a result of the COVID-19 pandemic relief funds is the Employee Retention Credit (ERC).
To date, our clients have filed and claimed ERC refunds exceeding $2,000,000 under this program. Claims for these refunds are included in the filing of original or amended Federal quarterly payroll tax returns.
The employee retention credit allows small business to claim a tax credit of 70 percent of up to $10,000 of an employee’s qualifying wages for each quarter of 2021. This means that in total, the credit for each employee could result in a tax credit up to $28,000.
For 2020, the credit is limited to just 50 percent of qualifying wages, up to $10,000 per employee for the entire year. Also, it is important to note that the definition of qualified wages includes the employee health plan expenses paid for by the employer.
In order to qualify for the ERC for 2021, a business must have a quarterly drop in gross receipts of at least 20 percent when comparing a quarter of gross receipts in 2021 vs. 2019.
In contrast, qualifying for the ERC in 2020 required a 50 percent drop when compared to a quarter’s gross receipts in 2020 vs 2019. If you were a business that experienced a full or partial suspension of operations due to governmental orders resulting from COVID-19, you would also qualify.
Recently, the Treasury and the Internal Revenue Service provided an optional safe harbor provision, which allows employers to exclude the proceeds received from Paycheck Protection Program loan forgiveness and Shuttered Venue Operating Grants from the gross receipts test when determining eligibility for the ERC.
If you would like assistance to determine if your business may qualify for ERC program, please reach out to our Zinner & Co. Tax Team and we will help you through the process to claim the ERC refund.
