Employee Retention Credit Expanded Under New Act

The recently passed Consolidated Appropriations Act of 2021 (CAA 2021) expanded the Employee Retention Credit (ERC) initially created by the CARES Act and extended the credit through June 30, 2021.  As a result, many more employers will now qualify to take advantage of the credit. 

Here is ATKG’s summary of the changes and how they might affect you:

 CARES ActCAA 2021
Requirements to QualifyBusinesses whose operations were suspended partially or fully by a COVID-19 government order; or businesses whose 2020 gross receipts for a quarter were less than 50% of gross receipts for the same quarter in 2019.Businesses whose operations were suspended partially or fully by a COVID-19 government order; or businesses whose 2021 gross receipts for a quarter are less than 80% of gross receipts for the same quarter in 2019.  (Businesses not in operation in 2019 may use 2020 for comparison.)
Credit Amount50% of up to $10,000 qualifying wages and health benefits per employee. The maximum credit was $5,000 per employee.70% of up to $10,000 qualifying wages and health benefits per employee. The new maximum credit for 2021 is $7,000 per employee for each of the first two quarters of 2021 ($14,000 total for the year). Businesses can claim $5,000 per employee for 2020 and $14,000 per employee for 2021, giving them a maximum credit of $19,000 per employee.
PPP ImpactPPP borrowers were not eligible to take the credit.PPP borrowers are now eligible for the credit in 2021 and may also amend employment tax returns to claim the credit for 2020.  Note:  The ETC may not be claimed using the same wages used in applying PPP loan forgiveness. 
Company SizeOriginally only businesses with fewer than 100 full time employees could take the credit for wages paid to employees currently working.Businesses with 500 or fewer employees can now take the credit for wages paid to employees currently working.
How to Claim the CreditBusinesses could only claim the credit against payroll tax deposits.Businesses can claim the credit against payroll tax deposits or apply for an advance of the credit based on 70% of the average quarterly wages paid in 2019.

This chart is only a summary. For a more detailed explanation of the ERC and how your business can qualify, please reach out to your trusted ATKG advisor.

Tom Landers is a Tax Professional with ATKG and a Certified Public Accountant. He graduated from Southern Methodist University with a bachelor’s in business administration. He was a recipient of the Hunt Leadership Scholarship – an award given annually to approximately twenty students from across the United States. Tom received his Master of Science in Accounting with a concentration in Tax. Before joining ATKG in 2020, he worked for a Big Four firm for nearly two years.