The employee retention credit (ERC) has been a key component of the government’s response to the economic impact of the COVID-19 pandemic. The credit was initially introduced as part of the CARES Act in 2020 and has since undergone several updates and expansions to provide additional relief to businesses.
The latest updates to the ERC were included in the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act, both of which were signed into law in late 2020 and early 2021, respectively. These updates have expanded the eligibility criteria for the credit and increased the potential benefits for qualifying employers.
One of the major changes to the ERC is the expansion of eligible employers. Under the CARES Act, only businesses that experienced a significant decline in gross receipts or were subject to a government-mandated shutdown were eligible for the credit. However, the recent updates have expanded eligibility to include businesses that have experienced a decline in gross receipts of 20% or more in any calendar quarter in 2021 compared to the same quarter in 2019. This expansion has allowed more businesses to take advantage of the credit and receive much-needed relief.
Additionally, the maximum amount of the credit has been increased for 2021. The credit amount is now equal to 70% of qualified wages (up to $10,000 per employee per quarter) for each of the first two quarters of 2021, compared to 50% for 2020. This increase in the credit amount allows businesses to potentially receive larger credits for retaining their employees during the ongoing economic challenges.
Furthermore, the recent updates to the ERC have also made it easier for businesses to claim the credit. For example, the new legislation has expanded the ability of businesses to claim the credit against their payroll tax liabilities. This allows businesses to access the funds more quickly and easily, providing immediate relief to cash-strapped businesses.
It is important for businesses to understand these updates to the ERC and take advantage of the credit if they qualify. The additional relief provided through the expanded eligibility criteria, increased credit amount, and ease of claiming the credit can provide much-needed support to businesses as they navigate the ongoing economic challenges brought about by the pandemic.
In conclusion, the recent updates to the employee retention credit have expanded eligibility and increased the potential benefits for qualifying employers. It is crucial for businesses to understand these updates and take advantage of the credit to receive the relief they need during these challenging times. By doing so, businesses can retain their employees and contribute to the overall economic recovery.