The Thomson Reuters Checkpoint Payroll Editorial team has recently updated the Employee Retention Credit Tool.
Background
Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Employee Retention Credit (ERC) provides a refundable payroll tax credit for 50% of qualified wages of up to $10,000 per employee for a maximum credit of $5,000 per employee. Under the CARES Act, the ERC may be claimed for wages paid after March 12, 2020, and before January 1, 2021.
“Eligible Employers” include private-sector businesses and tax-exempt organizations whose operations have been fully or partially suspended because of a government order limiting commerce, travel, or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts (sometimes referred to as a “significant decline in gross receipts”), measured on a year-over-year basis.
Expansion and extension of ERC
On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 (CAA, 2021) into law. The CAA, 2021 includes the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR), which extends and expands upon the ERC provided by the CARES Act.
Beginning on January 1, 2021 and through June 30, 2021, eligible employers may claim a refundable tax credit against certain employment taxes equal to 70% of qualified wages, up to $10,000 per employee for a maximum credit of $7,000 per employee for each of the first two quarters of 2021.
Additionally, TCDTR increased the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees.
TCDTR also retroactively permits employers who receive a Paycheck Protection Program (PPP) loan to claim the ERC for wages that are not paid for with forgiven PPP proceeds.
Employee retention tool
The Employee Retention Tool has been updated to reflect these recent changes. This tool will be updated in the future as further guidance is released.
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