There is much awareness of the Paycheck Protection Program (PPP) which has been receiving a lot of news attention and hype over the past year +. What you are probably not hearing about, and/or if you are, you might not really understand the details, is the Employee Retention Credit (ERC) that can also be super impactful to both essential and non-essential businesses during this ongoing pandemic. This is the first time in tax credit history that businesses of ALL sizes and in all industries can benefit from the same program!
The ERC allows employers who experienced fully/partially suspended operations or a downturn in revenue to receive a refundable tax credit. A full suspension refers to a complete and total suspension of operation. A partial suspension refers to anything from decreased hours of operation to travel bans to the delayed receipt of supplies and goods, all of which dramatically inhibit a company’s day-to-day business.
Even businesses who remained open as well as essential businesses can be eligible for this credit! This is not a loan but an above-the-line, refundable payroll tax credit that offsets a business’ federal tax withholdings and is being offered to businesses of all sizes and in all industries, even non-profits. This refundable payroll tax credit, capped at $33,000 per employee, is a significant opportunity to infuse cash quickly into your business.
Here is the even better news! The CARES Act Employee Retention Credit, as of December 2020, allows relief to businesses that received Paycheck Protection Program (PPP) loans through the SBA. These businesses can use the credit on retroactive wages paid back to March 2020, although just not on wages paid with PPP loan funds. Other important eligibility points include:
- A prospective credit increase from 50% of up to $10,000 of qualified wages annually to 70% $10,000 of qualified wages per quarter starting January 1, 2021; and
- Public universities and hospitals as of December 2020 are now considered eligible employers.
The legislation for this credit has so many unique rules and nuances, and because our CEO and Government Relations Team has a direct line to legislators in DC, that gives us the ability to react quickly to ongoing changes and ensures our clients truly understand this opportunity while staying in strict compliance with the law.
Let us help you! For more information on how your business can benefit from the CARES Employee Retention Tax Credit, please reach out – my team and I would love to talk you through your eligibility!