Since the passing of the Employee Retention Credit, which was first introduced through the CARES Act on March 27, 2020, there have been a number of updates and changes. Below, we provide you with a high-level overview of where the tax credit currently stands, eligibility requirements, and what step you must take if you are a B2E Solutions client and believe you are eligible.
Eligibility timeframe changes
- The initial eligibility timeframe of the Employee Retention Credit, as established in the CARES Act, applied to wages paid March 13, 2020, through Dec. 31, 2020.
- The Consolidated Appropriations Act made many changes (listed in each section below), including extending the credit to wages paid Jan. 1, 2021, through June 30, 2021.
- Most recently, the American Rescue Plan extended the credit availability to wages paid between July 1, 2021, and Dec. 31, 2021.
The Employee Retention Credit is scheduled to expire on Dec. 31, 2021. However, the Infrastructure Investment and Jobs Act, if signed, will move the expiration date up to Sept. 30, 2021. The Act is currently sitting in the House of Representatives with an expected vote date is between Sept. 27 and Sept. 30, 2021.
Any size business which experienced either of the below may be eligible for the tax credit:
- A full or partial suspension in operations due to orders from a governmental authority which limited commerce, travel or group meetings (for commercial, social, religious or other purposes) due to COVID-19, or
- a significant decline in gross receipts compared to the same quarter in 2019. (2020 decline requirement is 50%, 2021 decline requirement is 20%)
Interaction with Paycheck Protection Program (PPP) loans
- Under the CARES act, employers were not eligible to take advantage of both the PPP and the Employee Retention Credit. However, the Consolidated Appropriations Act (December 2020) removed that restriction retro active to the start of the credit (March 13, 2020).
- The only restriction now is that the same wages cannot be claimed against both the Employee Retention Credit and PPP Loan Forgiveness.
- For 2020, the credit is 50% of eligible wages and health care expenses, up to $10,000 per employee for the year. There is a maximum credit of $5,000 per employee.
- For 2021, the credit is 70% of eligible wages and health care expenses, up to $10,000 per employee per quarter. There is a maximum credit of $28,000 per employee.
- For 2020, if an employer averaged 100 or less full time employees (FTEs) in 2019, all wages paid during the eligible timeframe were considered “qualified." If an employer averaged more than 100 full time employees (FTEs) in 2019, the only "qualified" wages under the CARES act are those paid to an employee when not preforming a service (i.e. furlough), during the eligible timeframe.
- For 2021, a similar logic applies to determine qualified wages, however the dividing line changes from 100 to 500 full time employees (FTEs) in 2019.
- For more details on the Employee Retention Credit and the various changes, there is a slide deck and webinar recording available for download within Workforce Ready (see the "download documents"section of the system). You can link directly the recording of the webinar here.
- Other IRS resources:
What to do if you believe you are eligible for the Employee Retention Credit?
If you are a B2E Solutions client and think you're eligible for any quarter in 2020 or 2021, please complete our Employee Retention Form.