Employee Retention Tax Credit Modifications

A recent tax act extends the CARES Act employee retention tax credit (ERTC) through December 31, 2021. It also expands the ERTC and contains technical corrections. The expansions of the credit include:

  • An increase in the credit rate from 50% to 70% of qualified wages;
  • An increase in the limit on per employee creditable wages from $10,000 for the year to $10,000 for each quarter;
  • A reduction in the required year-over-year gross receipts decline from 50% to 20%;
  • A safe harbor allowing employers to use prior-quarter gross receipts to determine eligibility;
  • A provision to allow certain governmental employers to claim the credit;
  • An increase from 100 to 500 in the number of employees counted when determining the relevant qualified wage base; and
  • Rules allowing new employers that were not in existence for all or part of 2019 to claim the credit.

The act also (retroactive to the effective date of the CARES Act):

  • Provides that employers who receive PPP loans may still qualify for the ERTC for wages that are not paidwith forgiven PPP proceeds;
  • Clarifies the determination of gross receipts for┬ácertain tax-exempt organizations; and
  • Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee.

Please give us a call if you need assistance in determining your eligibility.