New Legislation Bring Employee Retention Credit Updates

Back in January 2021, we shared with you a breakdown of the changes to the Employee Retention Credit resulting from the Consolidated Appropriations Act of 2021. These updates greatly enhanced the credit, extending the covered wage period, increasing the overall wage ceiling, and more.

Fast-forward to the new American Rescue Plan Act of 2021 (ARPA) signed into law on March 11, 2021, which brought with it another round of updates to the Employee Retention Credit.

Here are the main points you need to know:

• The Employee Retention Credit deadline has been extended from June 30, 2021 to December 31, 2021.
• The amount of the tax credit (70% of the qualified wages paid to the employee up to $10,000 per employee) will be extended through all four quarters of 2021. This updated the maximum tax credit to $28,000 per employee.
• Beginning in the third quarter of 2021, businesses that began operating after February 15, 2020 and average less than $1 million annually in gross receipts (“Recovery Startup Businesses”) will be eligible for the credit, regardless of any decline in gross receipts. These businesses will also be eligible for an increased maximum credit of $50,000 for the third and fourth quarters of 2021.
• Beginning in the third quarter of 2021, large businesses (500+ employees) that experienced a 90% or more decline in gross receipts compared to the same quarter in 2019 (“Severely Financially Distressed Employers”) will be eligible for the credit.
• The advance payment provision under the Consolidated Appropriations Act of 2020 would remain in effect through December 31, 2021.

To learn more about how ARPA has effected Small Business Administration loan programs and the Families First Coronavirus Response Act of 2020, please read our article on the SBA/FFCRA updates.

As with any major piece of legislation, we are still waiting for additional guidance. Do not hesitate to contact a member of our tax team with any questions you may have regarding these updates and how they may affect your business. We will update this article as soon as more information becomes available.