This refundable federal tax credit was first introduced in the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act of 2020 and was subsequently extended and enhanced in both the Consolidated Appropriations Act (CAA) in December 2020 and the American Rescue Plan Act (ARPA) in March 2021 to support employers who continued to pay eligible wages during the COVID-19 pandemic.
Changes to the credit as part of the CAA in December 2020 now allow small and medium sized employers who received Payroll Protection Program (PPP) loans the ability to retroactively (2020) and prospectively (2021) participate in both the PPP and ERC programs.
A refundable credit against payroll taxes, generated by eligible wages:
Qualified wages may also include certain eligible health plan expenses and must not overlap with certain other programs.
Employers that were engaged in an active trade or business during 2020 or during Q1-Q3 of 2021 where employees continued to receive pay and/or benefits despite having:
Experienced a significant decline in gross receipts
A full or partial suspension of business operations resulting from compliance with COVID-19-related governmental orders
Many employers don't realize that they likely qualify for a substantial benefit under the ERC program. Here are a few questions to prepare you for your consultation that will help us formulate a strategy and approach to maximize your refund.
How many entities are in your organization structure? Do you have several entities with common ownership? Are you a PE backed portfolio company?
How many full-time employees did you have on average in 2019?
Do you meet the gross receipts decline outlined above? If no, then it will be important to understand the operational and headcount deployment impacts you have experienced as a business since March 2020 - and how those impacts align to applicable government orders.
Did you receive a first and/or second draw PPP loan? Have you already submitted your forgiveness application for the first draw?
If you have under 500 employees, did you comply and participate in the FFCRA paid sick leave and family leave credit?
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