Assisting economically impacted companies to keep employees on the payroll
The CARES Act introduced the latest ERC to encourage companies to maintain their payroll. This ERC is a refundable credit that businesses can claim on qualified wages paid to employees during 2020 and 2021.
In 2020, it entitled employers to a 50% credit (maximum of $5,000 per employee) of the qualified wages paid to employees. This amount increased to 70% (maximum of $7,000 per employee, per quarter) for 2021 with the American Rescue Plan Act (ARPA).
Under the recently enacted American Rescue Plan Act (ARPA – Mar.2021) and previously under the Consolidated Appropriations Act, 2021, the employee retention credit, a provision of the CARES Act, is extended and expanded. With the signing of the Infrastructure Bill in November 2021, the ERC program was cancelled for Q4 of 2021.
| 2020 | 2021 | ||
|---|---|---|---|
|
FULL-TIME EMPLOYEE LIMITATION |
< 100 FTEs |
< 500 FTEs |
|
|
CREDIT AMOUNT |
50% credit on first $10,000 of wages |
50% credit on first $10,000 of wages |
|
|
MAXIMUM CREDIT ALLOWED PER EMPLOYEE |
$5,000 |
$21,000 |
|
|
DECLINE IN GROSS RECEIPTS THRESHOLD |
50% or greater relative to same quarter in 2019 |
20% or greater relative to same quarter in 2019 or relative to the prior calendar quarter |
| 2020 | 2021 | |
|---|---|---|
|
The ERC requires a 50% or greater decline in gross receipts to the comparable quarter in 2019 |
The ERC requires a 20% or greater decline in gross receipts to the comparable quarter in 2019 |
|
Many employers, including not-for-profits, qualify for the ERC. Eligibility is determined on a quarter-by-quarter basis. To be eligible the employer has to show they either:
OR
For 2020 you can receive a credit equal to 50% of the first $10,000 of Qualified Wages paid per employee in the aggregate for all eligible quarters. The maximum ERC for all of 2020 is $5,000 per employee.
For 2021, you can receive 70% of the first $10,000 of Qualified Wages paid per employee in each of the first 3 quarters in 2021. The maximum ERC for each quarter is $7,000 per employee. The maximum ERC for 2021 is $21,000 per employee.
