Employee Retention Tax Credits
What Is The Employee Retention Tax Credit?
The ERC is a refundable credit that businesses can claim on qualified wages, including certain health insurance costs, paid to employees.
What Are The Benefits Of The Employee Retention Credit?
- For 2020, the credit can be claimed against 50 percent of qualified wages, up to $10,000 in wages per employee, paid between March 13th and Dec. 31st, 2020. The maximum ERC is $5,000 per employee, annually in 2020.
- For 2021, the credit can be claimed against 70 percent of qualified wages, up to $10,000 in wages per employee, paid between January 1st and Dec. 31st The maximum ERC is $7,000 per employee, quarterly in 2021.
What Other Factors Should Be Considered When Evaluating The ERC?
The ERC is extremely complex and has been updated multiple times by Congress. Furthermore, the Internal Revenue Service has provided limited guidance on the ERC. As such, in considering the applicability of the ERC to your organization, below is a short list of key considerations that must be taken into account in your evaluation and analysis:
- Number of full time employees;
- Owner employees / relatives of owner employees;
- Common ownership rules / other business interests;
- Paycheck Protection Loan Proceeds;
- Full or partial suspension of business activities (understanding these rules and how you may qualify);
- Definitions of revenue (items to be included / excluded);
- Proper documentation to substantiate governmental audit
JPM has been diligently tracking the ERC and assisting numerous entities evaluate the applicability. Feel free to contact us to discuss how the ERC may apply to your situation.