Employee Retention Tax Credits Available

Tax Incentives for 2021 are available for small businesses affected by COVID-related shutdowns and disruptions.   For 2021, the employee retention credit (ERC) is a quarterly tax credit against the employer’s share of certain payroll taxes. The tax credit is 70% of the first $10,000 in wages per employee in quarters 1, 2 and 3 of 2021. That means this credit is worth up to $7,000 per quarter and up to $21,000 per year, for each employee. If the amount of the tax credit for an employer is more than the amount of the employer’s share of those payroll taxes owed for a given quarter, the excess is refunded – paid – directly to them.

These credits may deliver cash flow for your business as soon as you claim the.  You can file for this credit for Quarter 1, 2 and 3 of 2021 on your form 941 filing and may also receive an advance payment of a portion of the credit.

• 500 or fewer employees
• If you have received PPP you can still claim the tax credit
• Credits up to $21,000 per employee (was $28,000, see bullet below)*
• For 2021, the employee retention credit (ERC) is a quarterly tax credit against the employer’s share of certain payroll taxes. The tax credit is 70% of the first $10,000 in wages per employee in each of the first 3 quarters of 2021. That means this credit is worth up to $7,000 per quarter and up to $21,000 per year, for each employee. If the amount of the tax credit for an employer is more than the amount of the employer’s share of those payroll taxes owed for a given quarter, the excess is refunded – paid – directly to them.
• President Biden’s signing of the Infrastructure Investment and Jobs Act (IIJA) on November 15, 2021, retroactively eliminates an employer’s ability to claim employee retention credits (ERC) for eligible wages paid after September 30, 2021. This means the maximum ERC per employee available to an eligible employer in the tax-year 2021 is $21,000, not $28,000.
• Eligible employers that have not yet claimed (or incorrectly claimed) any ERC for qualified wages paid between March 13, 2020, through and including September 30, 2021, may still obtain the ERC by amending their quarterly employment tax returns, i.e., Forms 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

The Department of Treasury offers this fact sheet. Note it has not been updated to reflect the elimination of the tax credit in the 4th Quarter of 2021

https://home.treasury.gov/system/files/136/ERC-COVID-Snapshot-5.7.21_full-text.pdf