Recent law clarifies and expands the employee retention credit of the CARES Act
The Internal Revenue Service is urging employers to take advantage of the newly expanded employee retention credit, designed to make it easier for businesses that, despite the challenges posed by COVID-19, choose to keep their employees on the payroll.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 amended and extended the Employee Retention Credit (ERC) for a six-month period until June 30, 2021. Several of the changes do not apply until 2021, while others apply to both 2020 and 2021.
As of January 1, 2021, employers are eligible if they operate a trade or business between January 1, 2021 and June 30, 2021 and they have:
- A total or partial suspension from the operation of their trade or business during this period due to government orders restricting trade, travel or group meetings due to COVID-19, or
- A decrease in gross receipts during a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts of the same calendar quarter in 2019 (to be eligible on the basis of a decrease in gross receipts in 2020 the receipts had to be less than 50%).
Thanks to the new legislation, eligible employers can now claim a refundable tax credit on the employer’s share of social security tax equal to 70% of the eligible salary they pay to employees after December 31, 2020 until June 30, 2021. Qualified salaries are limited to $ 10,000 per employee per calendar quarter in 2021. Thus, the maximum amount of ERC available is $ 7,000 per employee per calendar quarter, for a total of $ 14,000 in 2021.
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UNEMPLOYMENT INSURANCE FRAUD