Understanding the Latest Updates on employee retention credit (ERC) Availability
The COVID-19 pandemic has had a massive impact on businesses around the world, forcing many to adapt to new circumstances and navigate through unprecedented challenges. As governments continue to introduce measures to support struggling businesses, it is crucial for employers to stay informed about the latest updates on available resources.
One such resource is the employee retention credit (ERC). The ERC is a refundable tax credit designed to incentivize businesses to retain their employees during these difficult times. The credit was originally introduced under the CARES Act in 2020 and has since undergone several updates to expand its availability and reach.
The latest updates on ERC availability bring good news for employers. The Consolidated Appropriations Act of 2021, signed into law on December 27, 2020, made significant changes to the ERC, making it more accessible and beneficial for businesses. Some of the key updates include:
Expanded eligibility: Previously, businesses that received Paycheck Protection Program (PPP) loans were ineligible for the ERC. However, the new legislation allows businesses to retroactively claim the credit for wages not covered by PPP loans. This change opens up the opportunity for many businesses that previously did not qualify for the ERC.
Increased credit amount: The maximum credit per employee has been raised from $5,000 to $14,000 for the first and second quarters of 2021. This means that businesses can potentially receive a considerable amount of credit for each eligible employee they retain during this period.
Higher eligibility threshold: Previously, businesses with more than 100 full-time employees were not eligible for the ERC. Under the new guidelines, this threshold has been increased to 500 full-time employees, enabling larger businesses to take advantage of the credit.
Extended availability: The ERC was originally scheduled to expire on December 31, 2020. However, the latest update extends its availability until June 30, 2021. This allows businesses to continue benefiting from the credit for an additional six months.
These updates provide businesses with a much-needed lifeline as they strive to retain their workforce and overcome the economic challenges posed by the pandemic. By taking advantage of the ERC, employers can not only provide much-needed stability to their employees but also save on their tax liabilities.
It is important to note that businesses must meet certain criteria to qualify for the ERC. Eligible employers include those whose operations were fully or partially suspended due to a government order or those that experienced a significant decline in gross receipts. Employers should consult with tax professionals or refer to IRS guidelines to determine their eligibility and fully understand the requirements for claiming the credit.
In conclusion, the latest updates on employee retention credit (ERC) availability provide a glimmer of hope for businesses struggling to retain their employees amidst the ongoing pandemic. These changes expand the eligibility, increase the credit amount, raise the eligibility threshold, and extend the availability of the credit. Employers should stay up to date with the latest guidelines and consult with professionals to make the most of this valuable resource. By leveraging the ERC, businesses can navigate the challenges of these unprecedented times and emerge stronger on the other side.