Employee Retention Credit 2020 and 2021

January 25, 2021

IF YOU HAVE EMPLOYEES, THIS IS IMPORTANT FOR YOU TO READ.

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

Don’t hestitate to contact us.

Millbury MA:

Newport RI:

Save money on your upcoming tax bill.

Connect with us
Sign up for our weekly Tax & Finance Tips

When you sign up for our Newsletter you’ll receive our Free Report: 10 Most Expensive Tax Mistakes That Cost You Thousands

    Copyright © 2022 Smart Tax Advisor. Site developed by Simple Wizardry.