As a dork CPA, I wanted to throw out there a credit that many employers are not taking advantage of. I don't care to debate the merits of tax policy, just trying to make some forum members aware because this can be lucrative. CARES acted created PPP and ERC, however it said they couldn't coexist, so we stop CARESing about ERC. In December, Consolidated Appropriations Act (CAA) created round 2 of PPP, but it also allowed ERC to co-exist with PPP forgiveness (brought ERC back to life). Still can't double dip (can't use same wages for PPP forgiveness and ERC) but with the covered period for PPP going to 24 weeks, you can manage this.
The ERC is a credit against 941 taxes (fully refundable) and is equal to 50% of qualifying wages, not to exceed $10,000 of wages per employee for 2020 (so max of $5,000 per employee, excluding owners) for qualifying employers. Qualifying employer is one who had either 1) a quarterly decrease in 2020 revenue (gross receipts) compared to 2019 of at least 50% or 2) had a full or partial suspension of operations as a result of a local, state or national public health order (this one gets messy but can absolutely apply in the more restrictive shutdown states).
The CAA extended the ERC through all of 2021. It also changed the credit percentage to 70% and qualifying wages are now $10,000 per quarter (so $7,000 max per employee per quarter). It also changed the revenue drop to 20% of 2019 (you qualify if Q1 2021 had a drop of 20%+ compared to 2019). Read that paragraph again and think about the magnitude of it.
In my experience, there aren't a ton of employers taking advantage of this. In NM, where our little Napoleona had some of the most restrictive shut downs in the country, this is huge...every dine in restaurant in the state should look at it along with a number of different industries. Again, this is complicated, there is little guidance, there is PPP interplay, there are thousands of one-off situations and I overly simplified the explanation above to give you the jist of ERC.
The ERC is a credit against 941 taxes (fully refundable) and is equal to 50% of qualifying wages, not to exceed $10,000 of wages per employee for 2020 (so max of $5,000 per employee, excluding owners) for qualifying employers. Qualifying employer is one who had either 1) a quarterly decrease in 2020 revenue (gross receipts) compared to 2019 of at least 50% or 2) had a full or partial suspension of operations as a result of a local, state or national public health order (this one gets messy but can absolutely apply in the more restrictive shutdown states).
The CAA extended the ERC through all of 2021. It also changed the credit percentage to 70% and qualifying wages are now $10,000 per quarter (so $7,000 max per employee per quarter). It also changed the revenue drop to 20% of 2019 (you qualify if Q1 2021 had a drop of 20%+ compared to 2019). Read that paragraph again and think about the magnitude of it.
In my experience, there aren't a ton of employers taking advantage of this. In NM, where our little Napoleona had some of the most restrictive shut downs in the country, this is huge...every dine in restaurant in the state should look at it along with a number of different industries. Again, this is complicated, there is little guidance, there is PPP interplay, there are thousands of one-off situations and I overly simplified the explanation above to give you the jist of ERC.
