New COVID-19 Relief Law Extends Employee Retention Credit
Many businesses have retained employees during the COVID-19 pandemic and enjoyed tax relief with the help of the employee retention credit (ERC). The recent signing of the American Rescue Plan Act (ARPA) brings good news: the ERC has been extended yet again.
The original credit
As originally introduced under last year’s CARES Act, the ERC was a refundable tax credit against certain employment taxes equal to 50% of qualified wages, up to $10,000, that an eligible employer paid to employees after March 12, 2020, and before January 1, 2021. An employer could qualify for the ERC if, in 2020, there was a:
- Full or partial suspension of operations during any calendar quarter because of governmental orders limiting commerce, travel or group meetings because of COVID-19, or
- Significant decline in gross receipts (less than 50% for the same calendar quarter in 2019).
The definition of “qualified wages” depends on staff size. If an employer averaged more than 100 full-time employees during 2019, qualified wages are generally those paid to employees who aren’t providing services because operations were suspended or due to the decline in gross receipts. Qualified wages may include certain health care costs and are […]