Employee Retention Credit 2020 and 2021

January 25, 2021 Posted by: Category: Blog No comments


In the spring, under one of the many stimulus bills, there was a new credit announced called the Employee Retention Credit.  It was designed to help businesses continue to pay employees.  The requirement for the credit was that a business had to experience a full or partial shutdown by a governmental order, or have a reduction in revenue of at least 50 % compared to the same quarter in 2020.  In addition, that business could not have received a PPP Loan.

In December 2020, the new bill passed on the 27th that changed the rules for this credit retroactive for 2020.  It eliminated the disqualification of a business with a PPP loan.  The other requirements stayed in place.

For the first and second quarter of 2021, the requirements have changed.  You can qualify if you experience a full or partial shutdown by a governmental order, OR you have a reduction in revenue of 20% or more.  These are easier qualification criteria.    NOTE: the “OR” in this case is very important.

The maximum credit for 2020 is $5,000 per employee for the year.

The Maximum credit for 2021 is $7,000 per employee per quarter.  It is only in place for the first and second quarter of 2021 at this point.

This could add up to be a very large credit.  It is also a refundable credit when you file your 941 quarterly payroll reports.

I believe it is wise to do this in two steps.  Step One would be to determine if your business would qualify for the credit and estimate a rough amount.  Step Two would be to do the work required to apply for this credit.

If you have additional questions, please schedule a zoom or phone appointment with me to discuss.


-Paul Dion


Paul Dion - Speaker, Author, and Tax Advisor - has been planning and preparing returns for business owners for over 25 years with a specialty in helping real estate agents and investors. His passion is to help business owners legally pay the least amount of tax using court-tested and IRS-approved tax strategies. In addition, he continues to advance service offerings to include income saving strategies designed to deliver higher profits to your business.