DON’T LEAVE MONEY ON THE TABLE! Employee Retention Credit Now Available to PPP Loan Recipients

Due to legislation passed in late December 2020, eligible employers with a Paycheck Protection Program (PPP) loan can now claim the employee retention credit (ERC) when they previously could not.  The ERC was also enhanced and extended to Q1 and Q2 of 2021, making it easier for larger employers to qualify.

Similar to the PPP, the purpose of the ERC is to encourage employers to keep employees on payroll.  The maximum credit for 2020 is $5,000 per employee for $10,000 of qualified wages.  For each of the first two quarters of 2021, the maximum credit is $7,000 per employee for $10,000 of qualified wages.  This results in a $14,000 credit in 2021 per employee.

Here are some key questions to consider in determining your qualified amount of ERC for 2020 and 2021 –

  • How many full-time equivalent employees did you have in 2019 (aggregation rules apply)?
  • Did your gross receipts decline by at least 50% in any quarter in 2020 as compared to the same quarter in 2019?
  • Are your gross receipts less than 80% in Q1 or Q2 of 2021 compared to the same quarter in 2019?
  • Was there a period where business operations were fully or partially suspended due to orders from government authority limiting activity due to COVID-19?

Here is an example to give you an idea of how substantial this refundable credit can be:

  • Company ABC has 50 employees in 2020 and Q1 and Q2 of 2021. Each employee earns $10,000 of eligible wages per quarter.
  • Company ABC is entitled to a refundable ERC of $250,000 for 2020 and $700,000 for Q1 and Q2 of 2021. That’s a total refundable credit of $950,000!

Don’t leave money on the table, especially during these difficult times.  For any questions relating to the Employee Retention Credit and how it applies to your company, reach out to a Sax advisor for guidance.

About the Author

Gina Perrone, CPA, MST is a Senior Tax Manager at Sax and an integral member of the firm’s Construction Practice.  She specializes in high quality tax services and planning opportunities to meet clients’ ultimate goals and objectives.  She can be reached at [email protected].

Get in touch with Sax by filling out the form below: