Why am I just hearing about the Employee Retention Credit?
There was a change to the CARES act on December 27th 2020 that now allows businesses who received a PPP loan to now qualify to receive these tax credits on wages paid out during the same time.
How do I qualify for the retroactive 2020 credit?
How do I qualify for the 2021 ERC credit?
Will this affect my PPP Loan forgiveness?
No, the PPP Loan amount is deducted from the ERC calculations and will be kept separate as required.
How is the ERC calculated retroactively for 2020?
Payroll Vault will calculate your credit based upon gross wages paid during your shut down/lost revenue times. The PPP Loan amount is deducted from your qualifying wages. The remaining wages are then capped out at $10,000 per employee. The credited amount is divided in half, making the credit amount a maximum of $5,000 per employee for 2020.
How is the ERC calculated for 2021?
Payroll Vault will calculate your credit based upon gross wages paid during your shut down/lost revenue times. The PPP Loan amount is deducted from your qualifying wages. The remaining wages are then capped out at $10,000 per employee. The credited amount is multiplied by 70% making the credit amount a maximum of $7,000 per employee PER QUARTER for 2021.
Why am I getting this credit?
This is a government refund/reward for keeping your employees on payroll during COVID down time (full/partial shutdown or lost revenue).
Will we need to pay taxes on this refund?
Yes, you will pay taxes on the refund amount on your business return as it reduces the payroll expenses paid. Make sure to talk to your accountant for details.
How will I receive the refund?
You will receive a paper check via USPS mail from the IRS.
When can I expect to receive the refund?
Unfortunately, we do not know timing. We are expecting this to take months.
When does Payroll Vault collect their fee?
After you have received the check from the IRS. We will watch your IRS activity on your behalf for progress on the process.
Is this legitimate legislation?
Was the ERC extended for all quarters in 2021?
Yes. The ARPA extended the maximum $7,000 per employee per quarter credit to all 4 quarters of 2021 for those businesses who meet the original criteria.
I am a new business who received both rounds of PPP loans. Can I still take advantage of the ERC?
Yes, but you will need to subtract the PPP funds that were used for wages for the same time frame you are calculating your ERC. Payroll Vault can help with these complicated calculations to make sure you can maximize your credits while staying in compliance with your PPP loan forgiveness.
I started my business in 2020, but didn’t close or have reduced revenue. What credits are available to me?
As part of the American Rescue Plan Act (ARPA), new businesses who started after February 15th 2020 are able to take advantage of the Employee Retention Credit (ERC) too. The wage and credit calculations will be the same, but the cap for the credit is $50,000 for the 3rd and 4th quarters of 2021.
I am a small business owner who was in business for a few years leading up to the pandemic. I was not closed nor did I have reduced revenue during Covid. Am I eligible for ERC?
If you started a new trade from your existing business after February 15th 2020, you could be eligible under the Recovery Start-up clause of the ARPA. The limit will be $50,000 per quarter for the 3rd and 4th quarters of 2021.