Employee Retention Credit Extended Through December 2021
Monday, June 21, 2021
The Employee Retention Credit (ERC), which was scheduled to expire on June 30, 2021, is extended through December 2021. The credit percentage remains 70 percent of up to $10,000 in qualified wages per employee per quarter; i.e., a $28,000 maximum credit per employee for 2021. Employers may qualify if their operation is fully or partially suspended due to orders from a governmental authority related to COVID-19, or if the organization can demonstrate that gross receipts for a calendar quarter are less than 80 percent of the gross receipts of the employer for the same calendar quarter in 2019. The credit is increased by the proportionate share of an employer’s health costs related to such wages.
The Employee Retention Credit is also extended to new businesses which started after February 15, 2020, with average annual receipts of under $1,000,000. For such businesses, the amount of the credit may not exceed $50,000 per quarter.
The Act relaxes restrictions on “Severely Financially Distressed Employers,” defined as those that can demonstrate that gross receipts are less than 10 percent of the gross receipts of the corresponding base period (generally the same calendar quarter in 2019). These organizations may apply the ERC to all wages paid to employees (up to the applicable $10,000 per employee per quarter limit), notwithstanding that they have over 500 employees. Normally employers with more than 500 full-time employees can only take the credit for wages paid to employees for time that the employee is not providing services (i.e., paid time off).