![]() Note: The Infrastructure bill that passed the Senate on August 10, 2021, would end the ERC early, on September 30, 2021, for all but recovery startup businesses. Although generous, the ERC is also complicated, which has, in some cases, prevented eligible employers from claiming it. Because the eligibility rules for 2021 are less stringent than those for 2020, many more employers may be eligible for a larger ERC in 2021. On March 11, 2021, the American Rescue Plan Act extended the ERC to apply from July 1, 2021, until December 31, 2021. They must, however, also amend 2020 income tax returns to reduce the corresponding wage deduction. Note: Some employers may benefit from filing amended payroll tax returns to retroactively claim the ERC. The CAA also extended and significantly expanded the ERC for 2021, through June 30, 2021.īecause of the CAA, many employers who were previously ineligible for the ERC in 2020 are now eligible to claim it. The CAA retroactively changed the law to allow employers who received PPP loans to qualify for the ERC, as long as the payroll expenses paid with forgiven PPP proceeds did not duplicate qualified wages used to claim the ERC. On December 27, 2020, Congress significantly modified the ERC in the Consolidated Appropriations Act, 2021 (CAA). Because the PPP was generally more beneficial in 2020, most eligible businesses elected to participate in the PPP instead of the ERC. ![]() When originally implemented, employers were not eligible for the ERC if they received a Paycheck Protection Program (PPP) loan. The ERC is a fully refundable payroll tax credit, meaning that, although it’s claimed against payroll taxes, the amount of the ERC may exceed the actual payroll taxes due. To encourage employers to keep employees on the payroll during the COVID-19 crisis, Congress created the ERC as part of the CARES Act, passed March 27, 2020. ![]() For those readers seeking more detailed information on the ERC, IRS FAQs and the referenced guidance will be helpful. Here, we provide a brief overview of the credit, as well as a summary of the new guidance. Recent guidance has clarified several longstanding questions. Although a fairly complicated credit, the ERC can be very beneficial to many employers. The employee retention credit (ERC) has been an important tax credit for many employers in 20. ![]()
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