“Is Your Company Qualified for the Employee Retention Credit?”

– The Employee Retention Credit (ERC), included in the CARES Act of 2020, has been modified multiple times, making it difficult to determine eligibility and calculate the credit accurately.
– The ERC provides cash to eligible employers as a refundable employment tax credit, with a maximum credit of $5,000 per employee in 2020 and $7,000 per quarter or $21,000 per employee for 2021.
– To be eligible, a business must have been fully or partially suspended by government orders or experienced a significant decline in gross receipts compared to the same quarter of 2019. – Businesses that were fully or partially suspended by government orders qualify for the Employee Retention Credit (ERC).
– Employers who received Paycheck Protection Program (PPP) loans are eligible for the ERC for both years but cannot qualify wages paid with forgiven PPP loan proceeds.
– The American Rescue Plan added two additional types of employers for the ERC: recovery startup businesses and severely financially distressed employers.
– Qualified wages for small and large employers differ based on the employer’s size and are subject to certain limitations.
– The size of the employer is only important for the definition of qualified wages and has no relation to eligibility for the ERC. – The ERC eligibility and rules are covered by five separate acts of Congress over a 22-month time period.
– This has led to confusion and uncertainty among business owners regarding their eligibility for the credit.
– It is advisable to consult with a First Citizens representative to determine if a company is eligible for the credit and whether it is favorable to seek an amendment to prior tax returns.

https://www.firstcitizens.com/small-business/insights/taxes/employee-retention-credit