Frequently Asked Questions:

Highlights of Employee Retention Tax Credit Modifications

The provision extends and expands the CARES Act employee retention tax credit (ERTC). It also contains technical corrections to the CARES Act.

Beginning on January 1, 2021, and through December 31, 2021, the provision:
Increases the credit rate from 50 percent to 70 percent of qualified wagesExpands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50 percent to 20 percent and provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 per quarter.Increases the 100 employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees.Allows certain public instrumentalities to claim the credit, and Provides rules to allow new employers who were not in existence for all or part of 2019 or part of 2020 to be able to claim the credit.

5 Year Extension of Empowerment Zones (Fed EZ) & Work Opportunity Tax Credit (WOTC)

2 Year Extension of Indian Employment Credit (IEC)1 Year (Plus 60 Days) Extension & expansion of Disaster Relief (Covers CA Wildfires, Hurricanes Zones on the COast and WInds in the Mid West.6 Month Extension & Expansion of the Employment Retention Tax Credit ( Covid Credit)

Retroactive to the effective date included in section 2301 of the CARES Act, the provision:

Provides that employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.Clarifies the determination of gross receipts for certain tax-exempt organizationsClarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee, consistent with IRS guidance.

Will my business qualify for the employee retention credit?

Any employer, regardless of size, is eligible for the credit during calendar year 2020 if the business: (1) is fully or partially suspended due to a governmental order related to COVID-19, or (2) experiences a significant decline in gross receipts (i.e., a reduction of 50 percent of gross receipts from the same quarter in 2019). The credit also applies to tax-exempt organizations if the operation of the organization is fully or partially suspended due to the circumstances described in (1) above. The credit generally does not apply to governmental employers, including the U.S. Government, state and local governments, or any agency of the foregoing. However, it does allow for government-owned businesses that are related to healthcare or university/colleges to claim the credit

Does the credit only apply to small businesses?

Eligible employers with 500 or fewer full-time employees may qualify. The credit applies to all employee wages/benefits.

How is the credit calculated?

The credit is calculated using wages and benefits employees were paid after March 12, 2020.

Where can I get more information on the Employer Retention Credit?

The IRS is expected to provide guidance regarding the credit, which will be available on the IRS.gov website – see Coronavirus Tax Relief.