Employee Retention Tax Credit 2021 Extended Till End of 2021 – ERTC 2021 Update
The new American Rescue Plan Act stimulus bill extended the Employee Retention Tax Credit until the end of 2021. This ERTC tax credit in 2021 provides additional financial help for small businesses during this Covid-19 pandemic.
This video is intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc. is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience. Freedomtax Accounting and Multiservices Inc. or its members cannot be held liable for any use or misuse of this content.
Employee Retention Credit
The act codifies the employee retention credit in new Sec. 3134 and extends it through the end of 2021. The employee retention credit was originally enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and it allows eligible employers to claim a credit for paying qualified wages to employees.
Under the act, the employee retention credit would be allowed against the Sec. 3111(b) Medicare tax.
Section 9651 of the ARPA adds new Section 3134 to the Internal Revenue Code (IRC) creating an employee retention credit (ARPA ERC), which is fundamentally an extension of the employee retention credit that was created by the CARES Act (CARES ERC) and later enhanced and extended by the Consolidated Appropriations Act, 2021 (CAA). The ARPA ERC extends the enhanced CARES ERC through the end of 2021 (the CAA had previously extended the credit through June 30, 2021). Like the CARES ERC, the ARPA ERC provides a credit against payroll taxes based on qualified wages paid by an eligible employer.
The ARPA ERC makes the following modifications to the credit, which apply prospectively to credits claimed for the third and fourth calendar quarters of 2021:
While the credit continues to be refundable, it is now a credit against the employer’s 1.45% share of the Hospital Insurance tax (i.e. the Medicare tax), rather than a credit against the employer’s share of the Old Age, Survivors, and Disability Insurance tax (i.e., the Social Security tax).
As under the CARES ERC, employers become eligible by experiencing (1) a full or partial suspension of operations due to certain COVID-19-related governmental orders or (2) a significant decline in gross receipts. The ARPA ERC adds a third path to eligibility for a recovery startup business (RSB). An RSB is an employer that does not qualify under either of the first two eligibility gateways and commenced a trade or business after February 15, 2020, for which the average annual gross receipts over a three-year lookback period (prorated for periods less than three years) do not exceed $1 million. While eligible employers generally are limited to a credit of $7,000 per employee per quarter, an RSB is limited to a total credit of $50,000 per quarter for all employees.
In defining qualified wages, the ARPA continues to distinguish between large employers that averaged more than 500 full-time employees during 2019 (2020 if the employer did not exist in 2019), and small employers under this threshold. For large employers, qualified wages continue to be wages paid to an employee who is not providing services due to the circumstances that caused the employer to be eligible for the credit. For small employers, the slightly modified qualified wages definition includes wages paid — without regard to whether the employee was providing services — during (1) the suspension period or (2) the calendar quarter for which the gross receipts test was met. Additionally, ARPA ERC modifies what constitutes qualified wages for a “severely financially distressed” employer that experienced a greater than 90% decline in gross receipts. For such an employer, whether a large or small employer, qualified wages include any wages paid during the calendar quarter.
The statute of limitations period for IRS assessment is extended from three years to five years.
Hello, good news for small business owners. The American rescue plan that was signed yesterday by president Biden, extends the employee retention credit to the end of 2021. Making additional financial help for small businesses during this coronavirus pandemic; that’s what we’re going to talk about in this video.
Hello from FreedomTax Accounting, we’re an accounting firm where we have been providing quality tax and accounting services now for over 20 years. If you’re new to this channel, we provide strategies for small business owners, so they can achieve their financial goals. Although, for the last couple of months, we have been concentrating on providing information on PPP, employee retention tax credit, the EID loans to help small business owners get the financial help they need to go through this coronavirus pandemic okay.
Now we are recording this video on March 12th, and always emphasize the recording on any video relating to any one of these PPP, EIDL, ERC financial helps from the SBA or the government, because these programs are constantly changing. So, there may be things that we discuss in this video that can change as soon as tomorrow. So, that’s the importance of subscribing to our channel, that way you’re always up to date with the most current and correct information regarding these loans from the SBA okay- or the IRS in this case.
Okay now the good news is, that the employee retention tax credit has been extended till the end of 2021. This came out of the American Rescue Plan Act that was signed yesterday by president Biden. If you do not know about the employee retention tax credit, this credit is not new. This credit was actually included back in the Cares Act back in March 2020.
Now this is or was a very good credit for 2020. And if you have seen our videos from last year, we had done a couple of videos back in April and May of 2020 where we were talking about this credit that in some cases, it was a better deal than the PPP. But for most small businesses the PPP was a better deal. And in 2020, you had to choose. You cannot have PPP and take the employee retention tax credit. You had to choose which program to use. And since the PPP was a better deal for most small businesses, that’s why the PPP got most of the attention. But all of that changed in December when the last stimulus bill that was signed by President Trump in the last week of December in 2020, that changed the rules.
From that stimulus bill that was signed in December of 2020, it allows businesses who got a PPP to go now, and also get the employee retention tax credit and then expanded it for the first two quarters of 2021. So, from January until now in 2021- January, February or March, we have been helping our accounting clients get the most out of this employee retention tax credit and get full PPP forgiveness. And thank god, we have been able to get our clients thousands and thousands of dollars in this payroll tax credit.
Now you can apply for this credit retroactive 2020. So, if you got PPP in 2020 and you did not take the employee retention tax credit in 2020, you may be able [if you qualify] to claim it retroactively.
Now if you don’t know the details on how this program works, watch this video which I am linking here at the top, where my coworker Carmen gives the specifics on how this program works okay.
An Overview basically for you to claim:
Once again, this is only for employers okay; for businesses that have employees in payroll. So, if you’re a self-employed independent contractor and you do not have employees on the payroll, this credit does not apply to you okay. And remember, if you’re self-employed or if you’re a business and you pay independent contractors with 1099, those are not considered. Employees okay employees is when your business has employees and you pay them through payroll and you give them a w-2 at the end of the year, okay.
So, for all of the employers that have employees on payroll and you did not get this credit for 2020, you can claim it now retroactive okay. So, it would be a good idea for you to call our office at 407-502-2400, and see if you can get that retroactive employee retention tax credit okay.
Now you first have to meet certain requirements. So, before you call, take a look at your accounting and see you can get this credit for 2020, IF you had a government-mandated shutdown. You can get the employee retention tax credit for the wages during the days of the shutdown. Or, check your quarterly accounting for 2020. So, if you have any quarter in 2020 that you can show at least 50% reduction in revenue compared to the same quarter in 2019, you can qualify for the employee retention tax credit okay.
Now, what’s the good news? Well in December this program was extended for the first two quarters of 2021. And they’re going to make it easier to get; I’m going to talk a little bit more about that. But now, president Biden signed the American rescue plan act yesterday and it extended the employee retention tax credit to the end of 2021. So, this is very good news, and they’re going to make it easier to get compared to 2020. They’re also going to give you a lot more money in 2021. For example, in 2020, you have to show you were shut down by a government mandate or you can show the 15% reduction in revenue for a quarter compared to 2019. But in 2020, the max you can get for an employee is $5,000 because it’s 50% of the wages up to $10,000 in wages; that’s for 2020. So, the max you can get for an employee for 2020 credit is $5000 per employee. But now in 2021 that has changed. Now they’re allowing you to get 70% of the employee’s wages, up to $10,000 in wages per quarter. So, that means that you can get up to $7,000 per employee per quarter. So, for 2021 you can get a total of $28,000 for a payroll tax credit per employee.
So, these are huge numbers and thank god that we have been able to help a lot of our accounting clients get the max employee retention credit, and also get 100% PPP forgiveness. Remember this in order to achieve PPP forgiveness and get the max employee retention tax credit you have to have a good strategy and it’s very technical because you have to see your quarters, accounting, and when you got the PPP funds because you cannot double-dip. The wages that you use for PPP forgiveness, you cannot use for the ERC. So, there’s a lot of different strategies that we are implementing to our clients. So, if we make sure that they get 100% PPP forgiveness, and get the highest employee retention tax credit available okay. But once again very good news that this program has been extended till the end of the year.
Oh, and I also forgot, for 2021 you don’t have to show the 50% reduction in revenue. You only have to show a 20% reduction in revenue. For any quarter in 2021, you have to show at least 20% reduction in revenue compared to the same quarter of 2019. So, they’re making this credit easier to get, and they’re getting more money per employee okay.
So, the best way to see if you qualify:
You can call our office. This is our phone number, you can call us at 407-502-2400, or visit our website freedomtaxfl.com. Schedule your consultation with one of our ERC experts. The consultation is not free okay; I want to put that upfront, so nobody gets mad. But call our profits to set up your consultation because with this credit we have been able to help a lot of our accounting clients get a lot of funds. And anything helps during this time okay.
So, once again, this is good news for small business owners. Thank you for watching this video. Remember that we are praying for you, your family, and your business. Let’s have faith in God that he is in control of our life and of our businesses okay. And subscribe to our channel, like, share this video with other business owners. And remember to watch this video for the details on how the employee retention tax credit works, all right. Thank you for watching. God bless you, bye.