Employee Retention Credits – It’s Not Too Late!
Just a reminder that it is not too late to qualify for and submit amended 941 quarterly filings for the Employee Retention Credits (ERC).
Previously, the receipt of PPP loan funds resulted in disallowance of qualifying for ERC; however, the Consolidated Appropriations Act of 2021 allows those entities that received PPP funds to also be eligible for ERC. The only requirement here being that the same wages cannot be used for both PPP and ERC calculations.
ERC is a fully refundable tax credit for employers equal to:
- 50% of qualified wages paid to employees during the 2020 calendar quarters (up to a maximum $10,000 in wages/employee for a maximum $5,000 credit/year)
- 70% of qualified wages paid to employees during the 2021 calendar quarters through September 30, 2021 (up to a maximum of $10,000 in wages/employee for a maximum of $7,000 credit/quarter)
Qualification may occur when a business experiences a gross receipts decline of 50% in comparing 2020 gross receipts or decline of 20% in comparing 2021 gross receipts to the same calendar quarter in 2019.
In addition, a business may qualify based on certain full or partial shutdowns and other interruptions to business operations.
Do note the ERC refund amount is taxable in the year the credit is generated (the quarter and year in which the amended 941 applies to), regardless of the accounting method of the business.
For 2020 credits, this requires amending 2020 tax returns impacted by the increased taxable income. This increased taxable income will likely cause additional tax owed, which may be subject to interest and penalties – but the IRS did recently release a reminder that penalty relief opportunities exist for “reasonable cause” and first time abatement requests. Accordingly, it is conceivable that amended returns due to ERC is grounds for a reasonable cause abatement.
We encourage checking out this opportunity now as 2021 quarter credits are reportable on your 2021 business return. If the refunds are needed to cover the tax burden associated with the taxable income the ERC creates, lead time is needed for the IRS to process the amended filings.
We can help as we have a dedicated team of professionals that can calculate the total potential ERC for your business as well prepare all necessary filings to claim the credit.
Shanie serves as the Office Tax Leader for the Atlanta office. She has 25 years of both assurance and tax experience with pass-through entities in industries including construction, real estate, commercial and professional services, Registered Investment Advisors (RIA), and landfills as well as individual taxation. Shanie is currently leading the Construction Industry group for the Atlanta office, which specializes in providing assurance and tax services unique to privately held construction businesses.
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