Government Tax Credits with the Employer Retention Tax Credit
In order to provide economic relief to businesses and individuals during the Coronavirus pandemic, the CARES (Coronavirus Aid, Relief and Economic Security) Act was signed into law in March 2020.
This $370 billion stimulus packlage makes funding available to small companies, which can be used to allow certain employers who retain employees during the crisis, to claim a tax credit. This tax credit is known as the Employee Retention Credit (ERC).
About the Credit
The ERC allows eligible employers to claim a credit against 50% of wages paid per quarter, up to $10,000 per employee annually, for wages paid between March 13, 2020 – December 31, 2020. The maximum credit is $5,000 per employee.
In December 2020, under the Covid-19 Relief Package, the ERC was extended from January 1, 2021 – December 31, 2021. This extension allows eligible employers to claim a credit against 70% of wages paid per quarter, up to $10,000 per employee, with a maximum allowable credit of $26,000 per employee.
Who Qualifies?
There are two ways that a business can qualify:
- Full or partial suspension of business operations as a result of a government order
- A significant decline in revenue compared to the same quarter in 2019.
Decline in revenue is defined as equal or greater than 50% for 2020 and equal or greater than 20% for 2021.
See the full ERTC flyer – click here to open!
For more details and information, please contact the Forbes Management team.