The Employee Retention Credit Goes “Retro”!

Remember “way back when” the original COVID-19 relief law stipulated that you had to choose between the retention credit and the PPP loan? Millions chose the PPP route.

Moving forward, things have changed for the better. As a PPP recipient, you may qualify to take the employee retention credit retroactively for the tax year 2020 quarters and into the 2021 tax year.

Here’s what you need to know:

  • PPP loan recipients can retroactively claim the 2020 employee retention credit for wages not paid with forgiven PPP loan proceeds.
  • Wages paid from March 13, 2020, through December 31, 2020, qualify for the retroactive credit.
  • Wages paid from January 1, 2021, through June 30, 2021, qualify for the more significant 2021 credit.
  • For 2021 quarters only, you qualify for the credit if your gross receipts for a calendar quarter are less than 80 percent of gross receipts from the same quarter in the tax year 2019. Alternatively, you can elect to qualify for a quarter by comparing the immediately preceding quarter’s gross receipts with the corresponding quarter in 2019.
  • For 2021 quarters only, the relaxed requirements for qualifying wages apply to businesses with 500 or fewer full-time employees in 2019.

This can represent an excellent benefit for businesses that took a hit throughout the pandemic. As always, if you have any questions, please contact me.