The (COVID-19) stimulus package signed into law by President Trump on Dec. 27 contains significant enhancements to the employee retention tax credit enacted under the CARES Act. The stimulus package clarifies that wages paid with PPP loans that are not forgiven may be qualified wages for ERC purposes retroactively. Previously, PPP loan recipients were not eligible for the employee retention credit (ERC).
Period of Credit Availability
Qualified wages paid after March 12, 2020 and before July 1, 2021 (extended to first two quarters of 2021)
Maximum Credit Amount
A potential to receive a maximum tax credit of $14,000 ($7,000 for EACH of the first two quarters of 2021) per employer for first two quarters of 2021
A potential to receive a maximum tax credit of $5,000 per employer for wages paid after March 12, 2020 to December 31, 2020 – will require to amend 2020 941 returns
The wages paid with PPP loans that are forgiven are not eligible for the employee retention credit.
Eligibility Requirements for the Credit
Business operations that are either suspended by a COVID-19 lockdown order or experienced more than 20% drop (50% drop for 2020) in gross receipts for a quarter in 2021 compare to same quarter in 2019 will be eligible for the credit.
A company with 500 (100 for 2020) or fewer employees in 2021 will be eligible for the credit, even if employees are working.
More updates will follow as soon!