The Enhanced Employee Retention Tax Credit (ERTC)

The Enhanced Employee Retention Tax Credit (ERTC)

  • Learn about the origins of the ERTC.
  • Find out how the new COVID-19 relief bill enhanced the ERTC.
  • Learn how the ERTC interacts with the PPP.

COVID-19 has shut down many businesses, causing widespread furloughs and layoffs. Luckily, employers that keep workers on their payrolls may meet eligibility requirements for a refundable Employee Retention Tax Credit (ERTC). Even better–the latest law includes an extension and enhancement of the ERTC. What can you expect from this new law? Fiducial has the highlights below!

Background on the ERTC

The CARES Act, enacted in March of 2020, created the ERTC. The credit:

  • Equaled 50% of qualified employee wages paid by an eligible employer in an applicable 2020 calendar quarter,
  • Was subject to an overall wage cap of $10,000 per eligible employee, and
  • Was available to eligible large and small employers.

The Consolidated Appropriations Act, enacted December 27, 2020, extends and greatly enhances the ERTC. Under the CARES Act rules, the credit only covered wages paid between March 13, 2020, and December 31, 2020. However, the new law now extends the covered wage period to include the first two calendar quarters of 2021, ending on June 30, 2021.

Also, for the first two quarters of 2021 ending on June 30, the new law increases the overall covered wage ceiling to 70% of qualified wages paid during the applicable quarter (versus 50% under the CARES Act). Also, it increases the per-employee covered wage ceiling to $10,000 of qualified wages paid during the applicable quarter (versus a $10,000 annual ceiling under the original rules).

The Enhanced How can the Employee Retention Tax Credit (ERTC) help your business?

How the ERTC interacts with the PPP

In a change retroactive to March 12, 2020, the new law also stipulates that the employee retention credit can be claimed for qualified wages paid with proceeds from Paycheck Protection Program (PPP) loans that aren’t forgiven.

What’s more, the new law liberalizes an eligibility rule. Specifically, it expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20%. It also provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.

We can help

We’ve only named some of the changes made to the ERTC, which rewards employers that can afford to keep workers on the payroll during the COVID-19 crisis. Need more information about this tax saving opportunity? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations to discuss your situation.

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For more small business COVID-19 resources, visit Fiducial’s Coronavirus Update Center to find information on SBA loans, tax updates, the Paycheck Protection Program, paid sick and family leave, and more.