The Consolidated Appropriations Act of 2021 signed into law Dec. 27, 2020, expanded the eligibility for the Employee Retention Tax Credit (“ERTC”) originally enacted under the CARES Act. An eligible employer can now generate up to $26,000 in a refundable payroll tax credit for each eligible employee.

What is the COVID ERTC?

The COVID ERTC is a refundable payroll tax credit based on qualified wages paid to an eligible employee. The credit was created to assist companies that continued to pay employees during the COVID-19 pandemic. The credit is currently available for wages paid in 2020. The program ended September 30, 2021 but can still be claimed retroactively.

Eligible Employers for the ERTC

Generally, any business may qualify if it meets one of two tests to qualify for the ERTC:

1. Full or partial business disruption and/or closure due to the COVID-19 pandemic; OR

2. Experienced a quarterly decline in gross receipts as compared to 2019; 50% decline in 2020 and 20% in 2021. However, it possible that a business had record receipts in 2020 and still qualifies for the ERTC.

In general, a qualified employer must have 100 or less full-time equivalent employees during base year to qualify for 2020 benefits and 500 base year or less full-time equivalent employees during base year to qualify for the 2021 benefits.

Maximum Amount of ERTC Available for Each Employee

The maximum ERTC is $5,000 per employee for 2020. The maximum ERTC for 2021 is $7,000 per employee per quarter or $21,000. The total a company could generate in ERTC is $26,000 per employee over 2020 and 2021.

PPP Loan Coordination

Recipients of a PPP loan can now also qualify for ERTC. Any wages paid with PPP loan proceeds do not qualify for the ERTC. A review of the PPP loan proceeds and qualified wages must be performed in calculating the ERTC.

Documents Needed to Scope Opportunity

In addition to a review of the impact of COVID on your business operations, the documents needed to evaluate the potential opportunity include but are not limited to:

• 2020 quarterly 941 forms

• 2019, 2020 & 2021 monthly gross receipts;

• Round 1 PPP loan amount and funding date; and status of PPP forgiveness.

• Round 2 PPP loan applied for and/or received