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ERC Changes and New Guidance

ERC Changes and New GuidanceEmployee Retention Credit - Changes and New Guidance

The Paycheck Protection Program (PPP) and employee retention credit (ERC) were both included in the CARES Act to provide businesses with economic relief.

These programs were initially mutually exclusive so that you had to pick one or the other. However, the bill passed in December included the Taxpayer Certainty and Disaster Tax Relief Act of 2020 which has made it easier for employers to participate in both programs.

The Employer's Quarterly Federal Tax Return for Q1 of 2021 is due by April 30, 2021. Now is the time to consider the significant changes to the ERC credit to determine if it could be right for you. 

Who is an Eligible Employer

For 2020:

  • Employers who paid qualified wages after March 12, 2020 and before January 1, 2021,
  • Who experienced suspended operations, or
  • Had gross receipts for such quarter that were less than 50% of its gross receipts for the same quarter in 2019.

For 2021:

  • Employers who paid qualified wages after December 31, 2020 and before June 30, 2021,
  • Who experienced suspended operations, or
  • Had gross receipts for such quarter that are less than 80% of its gross receipts for the same quarter in 2019 or the immediately preceding quarter.

​What is the Amount of ERC

For 2020:

  • The credit is equal to 50% of qualified wages paid, including qualified health plans up to $10,000 per employee.
  • The maximum credit available for each employee in 2020 was $5,000.

​For 2021:

  • The credit can be up to 70% of qualified wages paid, up to $10,000 per employee per calendar quarter of 2021.
  • The maximum credit for each employee in 2021 is $14,000.

ERC and PPP Loan Interaction

A significant change and guidance issued by the IRS retroactively amended the ERC. Eligible employers that received a PPP loan can now claim the ERC, though the same wages cannot be counted as payroll costs in obtaining PPP loan forgiveness.

In other words, the changes to these programs allow a business to receive the ERC credit even if they received a PPP loan – pending that the business doesn’t “double count” the payroll costs in obtaining PPP loan forgiveness.


How to Access the ERC in 2021

Employers can access the ERC for the 1st and 2nd quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits, which will be Form 941 for most employers.


Contact your trusted advisor at RBSK Partners for guidance & assistance in determining your eligibility. 


For more information visit our COVID-19 Guidance Center.

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