In January 2021, the IRS began to urge employers to take advantage of the extended employee retention credit, which was designed to help businesses keep staff on their payroll, despite the economic challenges brought on by the COVID-19 pandemic.
Enacted in late-December of last year, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 modified and extended the Employee Retention Credit (ERC) through June 30, 2021. According to an IRS press release:
As a result of the new legislation, eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.
Employers can access the ERC for the 1st and 2nd quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. Small employers (i.e., employers with an average of 500 or fewer full-time employees in 2019) may request advance payment of the credit (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits. In 2021, advances are not available for employers larger than this.
Business owners who are unsure of how to take advantage of the ERC, or who have questions about whether their business qualifies, are encouraged to speak with a tax professional.
About Hughes, Snell & Co, P.A.
The team at Hughes, Snell, & CO., PA, has decades of experience in helping our clients with a variety tax and business advisory services. We work with professionals in numerous industries, including bankers and lawyers, among others, and we help our clients coordinate comprehensive solutions for their financial planning needs. Our team of seasoned experts can provide you guidance in a variety of areas, including estate, trust & retirement planning, tax preparation & planning, financial reporting, client accounting & advisory services, and financial consulting & business planning, among others. We can also provide expert advice on whether your business is eligible for the ERC.