ERC Update for Employers ~ Symphony Employer Solutions Keeps YOUR Business Compliant

ERC Update for Employers: Understanding Available Credits under Each Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act authorized a credit called the Employee Retention Credit (ERC) to support employers hurt by the COVID-19 pandemic. Since being created by the CARES Act the ERC retroactively improved by the Consolidated Appropriations Act of 2021 (CAA) and the expanded and extended again by the American Rescue Plan Act (ARPA). Many employers are confused by the multiple retro-active changes, expansions, and updates to the law. The credits can be applied retroactively if employers discover that they were eligible in the past and did not take advantage of the ERC program. The following is a summary of the basics that will apply to most employers.
CARES Act CAA ARPA
Time Period for Credit Qualified Wages paid after Mar 12, 2020 thru Dec 31, 2020 Extends period to cover qualified wages paid from Jan 1, 2021 thru Jun 30, 2021 Extends period to cover qualified wages paid from Jul 1, 2021 thru Dec 31, 2021
Eligibility Requirements 1. Businesses with operations that were either fully or partially suspended by a COVID-19 governmental order and only during the period the order is in force; or 2. Gross receipts were less than 50% of gross receipts for the same quarter in 2019 until quarter as gross receipts are 80% of the same quarter in 2019. Aggregation rules apply for common control, Affiliated Service Orgs, and control groups to determine the decline in gross receipts. 1.  Same, No Change 2. Gross receipts are less than 80% of gross receipts for the same quarter in 2019. Aggregation rules continue to apply. 1.  Same, No Change 2. Same, No Change
Available Credit Credit is 50% of the qualified wages paid to an employee, plus the cost of providing health benefits to the employee. Beginning January 1, 2021, credit is 70% of qualified wages, plus the cost of providing health benefits to the employee. Same, No Change
Wage Cap and Eligible Credit 1. Per Employee wage cap of $10,000 in annual qualified wages 2. Credit Eligible wages is x 50%. 3. Maximum Annual credit cap of $5,000 per employee. 1. Wage cap is modified from $10,000 annual cap to $10,000 quarterly cap. 2. Credit Eligible wages increase from 50% to 70%. Beginning January 1, 2021, Quarterly credit cap is increased to $7,000 per employee for each of the first two quarters of 2021 ($10,000 in qualified wages x 70%) 3. Maximum possible credit $14,000 per employee. 4. Qualified wages cannot be counted twice. Example: can’t use to receive forgiveness of 1st or 2nd PPP loan and ERC credit. 1. Same, No Change 2. No Change to caps but expanded to include qualified wages in 3rd and 4th quarters of 2021. 3. Maximum possible credit $28,000 per employee. 4. Same, No Change
Inter Play with PPP Loan A company that receives a Paycheck Protection Program (PPP) loan is ineligible to claim the Employee Retention Credit (ERC). A company that received or receives a PPP loan is now eligible to use wages in excess of wages used for PPP loan forgiveness for ERC. Qualified wages cannot be counted twice. This modification is retroactive to include qualified wages paid after Mar 12, 2020. Same, No Change
Advance Payment of Credit No Advance Payment Employers can file Form 7200 for advance credits Same, No Change.
Impact of Employer Size Employers with 100 or fewer employees is eligible for the credit, even if the employee was working. A company with more than 100 employees cannot take the credit for wages paid to an employee performing services for the employer (either teleworking or working at the workplace, even though at reduced capacity due to reduction in business). Beginning January 1, 2021, the limit increases from 100 to 500. An employer with 500 or fewer employees will be eligible for the credit, even if employees are working. When calculating the 500-employee threshold, the employees of all aggregated companies are counted toward the threshold. Same, No Change.

This summary does not include all provisions of the CARES Act, CCA, and APRA. There are considerations that address non-profit organizations, Government employers, new employers, and other special circumstances. If you have any questions, please contact us at 866.652.8007.

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