Employee Retention Tax Credit
The Employee Retention Tax Credit (ERTC) was created as part of the CARES Act to encourage businesses to continue paying employees by providing a credit to the eligible employer for wages paid to eligible employees. Recent changes extended the credit through December 31, 2021 and allow for the ERTC to be utilized even by companies that received PPP loans.
NIREN PATEL CPA PLLC is providing the following services to assist with ERTC:
- Determine if the employer qualifies, and if so, for which quarters
- Determine which employee wages qualify
- Calculate credits, including estimates for current and future quarters
- Prepare form 7200 for employer to submit to IRS to receive advances
- After the quarter has ended, calculate the actual credits earned
- Reconcile actual credits with advance credits requested
- Prepare reconciled data for Form 941-X
On March 11, 2021, President Biden signed the American Rescue Plan Act, extending the ERTC through the end of 2021.
Recipients of PPP loans are now eligible to qualify retroactively for the credit in 2020 and 2021.
For 2021, there is a maximum credit of $7,000 per eligible employee, per quarter. The 2021 credit is computed at a rate of 70% of qualified wages paid, up to $10,000 per eligible employee, per quarter. For Eligible Employers with less than 500 average full-time employees in 2019, the credit is available for all employees receiving wages in 2021.
For 2020, there is a maximum credit of $5,000 per eligible employee. The 2020 credit is computed at a rate of 50% of qualified wages paid, up to $10,000 per eligible employee for the year. For Eligible Employers with less than 100 average full-time employees in 2019, the credit is available for all employees receiving wages in 2020.
An Eligible Employer (including all members of a control group) must either:
- Have their operations fully or partially suspended due to orders from a governmental authority
- Suffer a significant decline in quarterly gross revenue as measured against 2019
- 50% decline for 2020
- 20% decline for 2021
Additional rules and limitations apply.