ERC Information
In IR-2021-21, issued on January 26,2021 the Internal Revenue Service encourages employers to take advantage of the newly-extended Employee Retention Credit(ERC), which makes it easier for businesses that have chosen to keep their employees on the payroll despite economic and or operational challenges posed by COVID-19.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27,2020, as part of the Consolidated Appropriations Act, 2021. made a number of important changes to the employee retention tax credits previously made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The reach of these changes is broad and should prove advantageous for many employer/taxpayers.
Several of the changes apply only to 2021, while others apply to both 2020 and 2021.
Among the most important of the changes are those modifying and extending the ERC for six additional months, through June 30, 2021. Under the new modified rules, 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 paid to emplyees during the period after December 31,2020, through June 30,2021.
Moreover, retroactive to the March 27,2020, enactment of the CARES Act, the law now allows employers who received Paycheck Protection Program (PPP) loans to also claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan. It is important to note that those wages considered qualified in the first quarter of 2021 for purposes of determining ones' ERC cannot be counted again in consideration of the forgiveness of a Second Draw PPP loan.
