COVID-19 Stimulus Package and Employee Retention Tax Credit
We will be providing a running update on the the legal changes to the stimulus relief package as more measures are passed by the congress.
Key items to be aware of regarding the new law:
Employee Retention Credit(ERC) Employer Eligibility and Credit Amount Expanded
Credit Period extended to June 30, 2021,
Maximum Credit Increased to $14,000. Effective January 1, 2021, the credit cap is increased to $7,000 per employee for the first two quarters of 2021, calculated as follows, 70% of the $10,000 of wages per quarter for the first two quarters of 2021. Thus, a maximum credit of $14,000 per employee.
Eligibility Requirements Expands eligibility for the Credit by reducing the required year-over-year gross receipts decline from 50% to 20%. Thus, employers eligible if gross receipts for the first or second quarter of 2021 are less than 80% of gross receipts for the same quarter in 2019.
Employee threshold raised to 500- Increases the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees. Thus, an employer with 500 or fewer employees will be eligible for the Credit, even if the employees are working.
Removes the 30-day wage limitation, allowing employers to, for example, claim the Credit for bonus pay to essential workers;
Advance payment of Credit. Allows businesses with 500 or fewer employees to advance the Credit at any point during the quarter based on wages paid in the same quarter in a previous year
Retroactive CAA, 2021 provisions. Retroactively effective March 12, 2020, TCDTR:
• Reaffirms prior IRS guidance that group health plan expenses can be considered qualified wages even when no wages are paid to an employee; and
• Provides that employers who receive a Paycheck Protection Program (PPP) loan may still qualify for the ERC for wages that are not paid for with forgiven PPP proceeds.