We help entrepreneurs and businesses start, grow and prosper through street-smart business education and assistance

 
 

 

Are You Eligible for The Employee Retention Tax Credit?

    Written by Paul Mueller

The Employee Retention Tax Credit (ERTC) was enacted by The CARES Act in March 2020. Under the original rules, the ERTC was not available to PPP Loan borrowers.

As a result, it didn’t attract a lot of attention until recently.

As part of the Covid Relief Bill signed into law on December 27, 2020, Congress made two big changes to the ERTC:

  • First, the ineligibility to PPP Loan borrowers was retroactively eliminated. That means PPP Loan borrowers can now go back and amend their payroll tax filings for 2020 to claim refunds to the extent they qualified for the ERTC during 2020. As explained below, these refunds could be as much as $5,000 per employee.
  • Second, Congress extended the ERTC through June 30, 2021 and significantly increased the benefit to as much as $14,000 per employee.

How Can I Tell If I’m eligible for the ERTC?

For 2020, Employers were eligible to claim the ERTC if either of these two things happened:

  1. Your operations were fully or partially suspended due to a COVID-19-related governmental order, or
  2. You experienced a more than 50% reduction in gross receipts for one or more calendar quarters of 2020, as compared to 2019.

For 2021, Employers are eligible for the first half of 2021 if any one of these three things happened: 

  1. Your operations were fully or partially suspended due to a COVID-19-related governmental order; or
  2. 1st or 2nd quarter 2021 gross receipts fall by more than 20% compared to the same quarter of 2019; or 
  3. 4th quarter 2020 gross receipts fell by more than 20% compared to the 4th quarter of 2019. This test, though, only qualifies an employer for the ERTC for the 1st quarter of 2021.

If I’m eligible, how much is the ERTC?

For 2020, the maximum ERTC is 50% of qualified wages up to $10,000 for a maximum credit of $5,000 per employee. 

For 2021, the maximum ERTC is 70% of qualified wages up to $10,000 per employee, per quarter, for a total maximum ERTC of $14,000 per employee. 

How do I claim the ERTC?

For 2020, the IRS recently announced employers can amend their quarterly payroll tax filings (Form 941) to claim the ERTC. This is particularly relevant to PPP Loan borrowers who were thought to be ineligible up until the retroactive law change on December 27, 2020. ·

However, an employer that received a PPP loan may not use the same wages reported on their PPP forgiveness application in computing the ERTC.

For 2021, the ERTC is claimed as a holdback against the employer’s required payroll tax deposits. As an alternative, an employer can request the credit in advance, which will then be reconciled on the next quarterly payroll tax filing (Form 941). For employers participating in the second round of PPP Loans, the anti-duplication rule for wages (described in the preceding paragraph) will continue to apply.

The ERTC seems awfully complicated!

Yes, it is, particularly the retroactive eligibility applicable now for PPP Loan borrowers in 2020.

Because these are payroll tax credits, be sure to contact and work with your payroll provider to see how they can help you claim the tax credits you are entitled to.

Based on the per employee amounts, the ERTC can add up to real money fast!

3 Ways You Can Help YOUR Small Business

3 Ways You Help YOUR Small Business Sign up for FREE support and consulting at the Larimer SBDC. Financials, Marketing, E-Commerce and more. Times are tough, let us help you with your resiliency. Sign up for our Workshops! Our workshops cover multiple areas from QuickBooks, Making Your Business Official, Marketing, Social Media and so much more! Not seeing what you need? Contact us at info@larimersbdc.org and we’ll connect you to the right resource.

Read More »

New Colorado HR Compliance Laws for 2021

New Colorado HR Compliance Laws for 2021     Written by simplyHR  There will be a lot of ‘new’ happening when the ball drops at the stroke of midnight, ringing in 2021. New year. New administration. New regulations. New to-do lists. New resolutions. Some of these ‘news’ we know for sure, and some are still in the works. What isn’t new, is simplyHR wanting to make sure you are always in-the-know of the ‘new’! Here

Read More »

Techstars Startup Week

Are you hungry for more information to make your business aspirations come true? Be part of Techstars Startup Week Fort Collins!!! It is a free, 5-day celebration of entrepreneurship, community, and business education. Whether you are a startup, an established business or simply have an idea – Startup Week Fort Collins has something for you! Today we are highlighting:       Retail Merchandising – big business best practices for small businesses – Tami Parker By the

Read More »

Welcome Betina Meyer Pflug

Betina Meyer Pflug We have a new team member that you’re going to want to get to know.  Please join us in welcoming our newest consultant Betina Meyer Pflug. We are excited to have Betina and the business expertise she brings to the SBDC family! Betina Pflug is an entrepreneur, a business and life coach, a mother, and a marketing and CRM specialist. She has a degree in hotel management, received her MBA from Rotman

Read More »