February 23, 2021
On January 26th, the IRS published a press release encouraging employers to take advantage of the newly extended Employee Retention Credit. Passed on December 27th, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 makes it significantly easier for employers to take the Employee Retention Credit.
The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of qualified wages paid to employees up to $5,000 per employee in 2020 and $7,000 per employee per quarter for the first two quarters of 2021.
Most importantly, the Act expands the eligibility of employers able to take the credit. Prior to the passage of the Act, employers participating in the Payroll Protection Program were not eligible for the Employee Retention Credit. This legislation now enables employers with First or Second Draw PPP loans to claim the credit, however the credit may not be taken on wages applied to the PPP loans.
Another critical change outlined by the Act allows the employer to not only take the credit in 2021 but also take the credit retroactively to March 12th of 2020. (again with the same caveat regarding qualified wages and “double dipping”)./www.irs.gov/newsroom/new-law-extends-covid-tax-credit-for-employers-who-keep-workers-on-payroll.
Employers should consult with their CPA to determine whether you qualify for the credit as eligibility is based on gross receipts not payroll numbers.
As of Friday 2/12, the IRS had not issued any guidance regarding how to take the credit retroactively for 2020 or how the credit for 2021 should be taken in conjunction with the Second Draw PPP loans.
BizChecks Payroll will be helping our employers claim the 2021 credit as well as assisting clients calculating and applying for the 2020 retroactive credits. We will publish details about the process as soon as the IRS issues guidance.
If you determine that you are eligible for the credit, please send an email to your Payroll Specialist at BizChecks and we will ensure you receive details on how to process the credit.