Don't Miss Out on a $28,000 Tax Credit Per Employee

The COVID-19 recession isn’t over for everyone. For businesses still struggling to return to 2019 revenue levels, the tax law has a lifeline: a refundable tax credit of up to $7,000 per-employee, per-quarter.

It’s easy to see how $7,000 per quarter, per employee, can add up. For a qualifying company with 50 employees, for example, it could mean as much as $1,400,000 in benefits for 2021.

Employer Retention Credit

The Employer Retention Credit was first enacted as a tax credit of up to $5,000 per employee for 2020. It applies to taxpayers who have had a 50% decline in revenue for a 2020 quarter compared to the same 2019 quarter. As a result of new legislation, only a 20% quarterly 2021 gross receipts decline is required compared to the comparable 2019 quarter, and the maximum credit is increased to $7,000 per quarter.

Businesses that experienced a shutdown or partial suspension of operations by government order due to COVID-19 may also qualify.

Tax Credit 2021 Enhancements

This tax credit is obtained on quarterly payroll tax returns. Because it is “refundable,” the IRS will issue employers a check for any amount of the credit in excess of the quarterly payroll taxes.

There are other key enhancements for the credit for 2021:

• The 2020 credit was limited to employers with up to 100 full-time-equivalent employees. That goes up to 500 FTEs in 2021.
• Larger employers with 90% declines in employment for the third or fourth quarters of 2021 compared to the comparable 2019 quarters can qualify regardless of size.
• Some governmental agencies qualify for 2021.
• “Recovery Startup Businesses” which opened after February 15, 2020 and have average gross receipts under $1 million can qualify for the credit without meeting a gross receipts test.
• Employers can use prior quarter gross receipts for measuring qualification for the subsequent 2021 quarter.

To learn more, contact Joe Kristan at jkristan@eidebailly.com or Alex Radig at aradig@eidebailly.com.

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