2020 was a very bad economic year for many businesses. Quite often when you hear the phrase, “I’m from the government and I’m here to help”, the common response would be, yeah right! But 2020 was quite different. Congress enacted several pieces of key legislation that greatly helped many small to mid-size businesses.
Under the Consolidated Coronavirus Relief Act, 2021 (CCRA, 2021), congress expanded the eligibility for companies to claim the Employee Retention Tax Credits (ERC). Under the CARES Act, if a company received a Paycheck Protection Program Loan (PPP) they were not eligible to also claim the ERC. The CCRA, 2021 now allows businesses that received a PPP Loan to also qualify for the ERC.
During the year 2020, if your business recognized a 50% or greater reduction in revenue in any quarter, over the same quarter in 2019, you may qualify for the ERC. Businesses that were ordered closed or were only allowed to partially open to a limited occupancy capacity rate, do not have to meet the revenue reduction test. However, you cannot use the same wages that were covered by a PPP loan, to use for the ERC. Once the PPP proceeds have been spent, the wages paid in the following payroll period would qualify. The qualifying wages for the ERC were capped at $10,000 per employee in 2019 and the credit is equal to 50% of the qualifying wages, not to exceed $5,000.
The American Rescue Plan, that was signed into law by President Biden, increased the number of businesses that would qualify for the ERC. To qualify under the revenue reduction test in 2021, businesses must sustain at least a 20% revenue reduction and not 50%, as was the requirement for 2020. Qualifying wages paid during the year 2021 are now capped at $10,000 per quarter, per employee. The ERC credit was increased from 50% in 2020 to 70% in 2021.
Under the Family First CORONAVIRUS Response Act, (FFCRA), employers that paid their employees while they were out of work recovering from COVID or caring for a family member that was recovering from COVID are eligible for reimbursement.
Many employers were unaware of these benefits and are eligible to file amended payroll tax returns to claim the credits.
Our tax professionals at BKC are uniquely qualified to assist businesses in assessing the various tax credits that your business may be entitled to receive. For more information, please contact us.
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