The Employee Retention Credit (ERC) was introduced to encourage employers to keep their employees on the payroll and continue to provide health care benefits during the Coronavirus pandemic.
The ERC is a refundable payroll tax credit for wages and health plan expenses paid or incurred by an employer whose operations were either fully or partially suspended due to a COVID-19-related governmental order or where the employer experienced a significant reduction in gross receipts.
The eligibility period of the ERC was extended under the Consolidated Appropriations Act of 2021 to 30 June 2021, with the ERC rate extended to 70% from 50% of qualified wages. The limit was also increased on per-employee wages from USD 10,000 for the year to USD 10,000 per quarter (USD 50,000 per quarter for start-up businesses). In addition, employers that received a Paycheck Protection Program (PPP) loan and were previously prohibited from claiming the ERC may now qualify for it and can retroactively claim the ERC for 2020. The ERC has also been extended for another six months to 31 December 2021 under the American Rescue Plan Act of 2021 (ARPA).
Donna Chamberlain
dchamberlain@bdo.com