The ERC provides a refundable payroll tax credit to employers:
- Whose operations were fully or partially suspended due to government orders
- Who experienced a quarterly decline in gross receipts compared to the same quarter in 2019 (a 50% decline for the 2020 ERC; a 20%decline for the 2021 ERC).
For 2020, eligible employers are entitled to a credit equal to 50% of qualified wages up to $10,000 per employee paid in 2020 during qualifying quarters — i.e., a total credit in 2020 of up to $5,000 per employee. The definition of qualifying wages depends on if the employer had 100 or fewer full-time employees in 2019.
For 2021, Congress initially expanded the ERC under the Consolidated Appropriations Act. The 2019 full-time employee threshold for qualifying wages has been raised from 100 to 500 employees. The potential amount of the credit was increased to 70% of qualified wages up to $10,000 per employee paid in each of the first and second quarters of 2021.
Before the American Rescue Plan (ARP) passage, employers could only claim the ERC for the first two fiscal quarters of 2021. The ARP expanded the 2021 ERC to all four quarters and increased the maximum amount of the credit. Qualifying employers who continue to qualify for all four quarters of 2021 can now receive up to $28,000 in ERC per employee ($10,000 quarterly wage cap times 70% times four quarters).
Also, expanded eligibility for two new types of businesses were added: Recovery Startup Businesses (RSB) and Severely Financially Distressed Employers. For more information, contact Kristina Curry at 513.223.1130 or kcurry@pselaw.com.
