Employee Retention Tax Credit

Although the Infrastructure Bill was signed into law on November 15, 2021, there’s still time for eligible businesses to claim the Employee Retention Tax Credit (ERTC).

The ERTC (Employee Retention Tax Credit) is a one-time federal refundable tax credit designed to reward and encourage businesses to keep employees on payroll. It has been significantly expanded to provide more financial relief to a broader group of employers.

This credit is tied to payroll costs, similar to the PPP loans. However, unlike PPP, the ERTC is linked to payroll tax filings and related business tax returns. As a result, claiming the credit requires filing amended returns, making the process more complex than PPP. Nonetheless, we strongly encourage clients to pursue the credit—the financial benefit is substantial, and the funds are essentially “free” aside from preparation and filing costs.

How Much Is the Credit?

For 2021, employers can receive 70% of the first $10,000 of qualified wages paid per employee per quarter, up from 50% in 2020.

• The maximum ERTC is $5,000 per employee for 2020

• And $21,000 per employee for 2021

This is a tax credit, one of the most powerful tools in the tax code. While not quite as valuable as other credits (due to the required payroll deduction reduction), the ERTC still puts real money back in your company’s pocket.

Who Is Eligible?

You may qualify if your company:

1. Had a significant drop in revenue,
2. Was fully or partially shut down due to government orders, or
3. Started a new business with under $1 million in average annual revenue.

2020 Qualifications

• A drop in gross receipts by more than 50% in any calendar quarter compared to the same quarter in 2019

• Or a full or partial suspension of operations due to government mandates

2021 Qualifications

• A full or partial suspension due to government orders (even if you didn’t lose money)

• Gross receipts less than 80% of the same quarter in 2019

• Or alternatively, your preceding quarter’s gross receipts are less than the comparable 2019 quarter

These provisions reflect the government’s intent to support small businesses. We strongly recommend exploring and claiming this credit as soon as possible.

Note: You cannot double-dip. Wages claimed under ERTC may not also be used for PPP forgiveness, family leave credits, or similar COVID-19 relief programs. Strategic planning is required to optimize available benefits.