Employee Retention Tax Credit: What You Need to Know and Next Steps

The Employee Retention Credit (ERC) has gained momentum as businesses navigate the pandemic. Initially established in the March 2020 CARES Act, the American Rescue Plan Act (ARPA) passed in March of 2021 provides significant enhancements to the ERC.  The enhancements eliminated limitations on the tax credit, which had previously disallowed companies that received PPP loans.

In addition, the original 2020 CARES Act gave eligible businesses a refundable tax credit of up to $5,000 per employee for 2020 and $7,000 per employee per quarter for 2021. On August 4, 2021, Treasury and IRS released new guidance extending the 2021 credit from only the first and second quarters to all four quarters.

PPP recipients, originally disqualified from the ERC, now qualify. The eligibility tests are:

• 50% decline in gross receipts for any individual quarter in 2020 compared to the same quarter in 2019 (subject to limitations
• 20% decline in gross receipts for any individual quarter in 2021 compared to the same quarter in 2019 (subject to limitations)

OR

• Full or partial suspension of operations due to a government order connected to COVID-19

Navigating the complexities of the continually evolving rules and guidance, determining eligibility, and calculating the appropriate (non-PPP) wages to claim credits is where our team can help.

How HoganTaylor Can Help

HoganTaylor has assembled a team to monitor developments in financial assistance available to businesses hurt by the COVID-19 pandemic. We have been working to understand the legislation and guidance being issued to support the various programs available to affected business so that we can provide relevant and timely advice to our clients. As information becomes available, we will continue to recommend specific actions to take to effectively access these programs.

INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.