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August 31, 2021 | 3-minute read (500 words)
The Employee Retention Credit was initially established in March 2020 as part of the CARES Act, with the goal of keeping employees on employers' payrolls during the COVID-19 epidemic. It has subsequently gone through a few revisions.
These iterations were introduced in the American Rescue Plan Act of 2021, which extends the ERC until December 31, 2021. Some firms that did not qualify in 2020 may still be eligible in 2021, according to accountants.
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ERC 2020 |
ERC 2021 |
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Availability |
Applies to qualified wages paid by eligible employers after March 12, 2020, and before Jan. 1, 2021. | Applies to qualified wages paid by eligible employers from Jan. 1, 2021, to Dec. 31, 2021. |
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Eligible employers |
Any employer who had operations fully or partially suspended under government orders due to COVID-19. or, |
Any employer who had operations fully or partially suspended under government orders due to COVID-19. or, |
| Any employer who had a decline of at least 50% in gross receipts. | Any business with a decline in gross receipts of more than 20% compared to the same calendar quarter in 2019.
Note: State and local governments are now eligible; and employers who did not exist in 2019 can use the corresponding quarter in 2020 to measure the decline in their gross receipts. |
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What wages qualify? |
For employers averaging over 100 full-time employees: Only wages for those retained who are not working may be claimed. | For employers with over 500 full-time employees: They can only claim the ERC for those who aren’t providing services. |
| For employers averaging 100 or fewer workers: Wages for all employees regardless of whether they are working can be claimed. | For employers with 500 or fewer full-time employees: They can claim the ERC for all of them, regardless of whether they are working. | |
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Eligible employers can claim |
50% of qualified wages paid up to $10,000 per employee between March 13 to Dec. 31, 2020. | 70% of qualified wages paid up to $10,000 per quarter from Jan. 1 to Dec. 31, 2021. |
| Maximum credit amount per employee is $5,000 for the year. | Maximum credit amount per employee of $7,000 per quarter, a total of $14,000 per employee. | |
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PPP loans and eligibility |
Small businesses that took a PPP loan ineligible for the credit. | Small businesses that took a PPP loan are now eligible and may retroactively claim the credit until March 2020. |
Accounting
Finance
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