![]() ![]() The resulting overpayment may be immediately refunded or applied to reduce federal employment taxes due in future quarters. The ERC reduces liability for employment taxes reported on IRS Form 941, Employer’s Quarterly Federal Tax Return. The maximum amount of qualified wages taken into account for 2020 with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for qualified wages paid to any employee is $5,000.įor 2021, the portion of qualified wages and health plan costs taken into account for each employee is increased to 70% of the first $10,000 of wages paid each quarter, resulting in a maximum quarterly credit of $7,000 and $28,000 for the year. In addition, The American Recovery Plan (ARP), enacted on Maextends the ERC program through the end of 2021, and along with the CAA changes made in December, result in some favorable modifications for 2021 I will discuss in this article.įor 2020, the Employee Retention Credit equals 50% of the qualified wages (including qualified health plan expenses) that an eligible employer pays in a calendar quarter. If you received a PPP loan and have not yet applied for forgiveness, be sure to identify and claim all eligible non-payroll costs (rent, mortgage interest, utilities, etc.) as part of the forgiveness application to better ensure maximum qualified wages are available for the ERC. ![]() If you previously received a PPP loan and have already applied for forgiveness of that loan, then no portion of the wages involved in that transaction are eligible for the ERC. How does the ERC work in conjunction with a PPP loan? ![]() Since most eligible employers opted for a PPP loan instead of claiming the ERC, this relief credit was generally off the radar of many eligible employers. Originally enacted as part of the CARES Act in March 2020, and subsequently voted into law last December, the Employee Retention Credit (ERC) may now be claimed by eligible employers - and that includes tax-exempt nonprofit organizations - that previously received a Paycheck Protection Program (PPP) loan. Categories: Finance Topic Tags: Accounting| Financial Management ![]()
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