The Consolidated Appropriations Act signed by President Trump on December 27, 2020, had various COVID-19 relief provisions for small businesses. One of the more significant provisions was the eligibility revisions for the Employee Retention Credit. The Act made it possible for many small businesses to be able to take advantage of this refundable tax credit against their federal payroll tax liabilities, generally reported on quarterly Forms 941.
For the calendar year 2020, qualifying employers can receive up to a $5,000 tax credit per qualifying employee. For the first two quarters of 2021, qualifying employers can receive up to a $7,000 tax credit per qualifying employee, per quarter. Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business and experienced either:
- The full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- A significant decline in gross receipts.
A significant decline in gross receipts begins on the first day of the first calendar quarter of 2020 for which an employer’s gross receipts are less than 50% of its gross receipts for the same calendar quarter in 2019. For 2021, generally, a significant decline in gross receipts begins on the first day of the first calendar quarter of 2021 for which an employer’s gross receipts are less than 80% of its gross receipts for the same calendar quarter in 2019.
If you believe you may qualify for the Employee Retention Credit based on the criteria above, or if you want to learn more about it, please give us a call to discuss it further.