Author: Tammy Maguire, Director of Financial Services
Employee Retention Credit for 2021
As the first quarter of 2021 comes to an end, businesses should be considering if they are eligible for the employee retention credit. Eligibility, as well as the credit calculation, is very different for 2021 compared to 2020.
Eligibility for 2021
- The operation of your trade or business is fully or partially suspended during a calendar quarter due to orders from a government authority to COVID-19; or
- Gross receipts show a decline of at least 20% for the same quarter in 2019.
If you are a new business, the IRS allows the use of gross receipts for the quarter in which you started business as a reference for any quarter which they do not have 2019 figures because you were not in business yet.
Credit Calculation
- A 70% credit on qualified wages up to $10,000 per employee per quarter can be claimed by employers.
- Maximum credit to be claimed per employee is $7,000 and $28,000 for the year.
Eligible Wages
- Qualified wages will depend on the number of full time employees the business has. Full-time employees for the credit is defined as 30 hours a week or 130 hours a month.
- If the employer has over 500 full-time employees, qualified wages are defined as wages paid to an employee while the employee was not providing services because of suspension or decline in business (vacation and sick pay are excluded from wages). Essentially, the credit is available only for employees not working.
- If an employer has less than 500 full-time employees, any wages paid during the period of economic hardship are considered qualified wages (cannot take credit on the same wages for paid family medical leave).
- When calculating the 500 employee threshold, the employees of all affiliated companies sharing more than 50% common ownership are aggregated.
The credit has been extended to December 31, 2021 and should be evaluated each quarter.
Qualified wages used for the Employee Retention Credit cannot be used in the forgiveness calculation for the Paycheck Protection Program or the Restaurant Relief Fund. Navigating the programs eligible to employers to maximize benefits can be complicated and overwhelming.
If you need assistance or have any questions on the Employee Retention Credit, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at info@cironefriedberg.com.
