Understanding the Federal Employee Retention Credit and Recent Changes to the Program

As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Congress provided the Employee Retention Credit (“ERC”), which provides a refundable credit by means of reducing payroll tax liability for employers who retained payroll throughout the pandemic. As initially enacted, the ERC could be claimed against qualified wages paid after March 12, 2020, and before January 1, 2021. However, the ERC has since been amended to expand eligibility and extended to account for qualifying wages through December 31, 2021.

Overview of Qualification Requirements

In order to qualify for the ERC for 2021, a company must either be subject to a full or partial government-mandated suspension due to COVID or experience a 20% decline in gross receipts during a calendar quarter when compared to the same quarter of the 2019 tax year or a previous quarter. This is a marked difference from the 50% decline in gross receipts initially required under the CARES Act when claiming the ERC for 2020.

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We’re Here to Help

If you would like to discuss how your business may be impacted by these changes or for more information about Bennett Thrasher’s Credits & Incentives practice, contact Betsi Barrett or Nina Desai by calling 770.396.2200.