The Employee Retention Credit Extended for Q3 and Q4

April 6, 2021 | CAA, Employee Retention Credit, ERC, IRS

The Employee Retention Credit (“ERC”) has been extended through the end of 2021 with the passing of the American Rescue Plan Act. Consistent with previous stimulus packages, it is aimed to provide relief to the employers whose business operations were suspended partially or entirely due to COVID-19 shut-downs or employers who experienced a decline in gross profit due to a decrease in sales because of COVID-19. Under the ARPA, eligible employers can receive up to $7,000 per employee for Q3 and Q4 of 2021.

The Employee Retention Credit under the American Rescue Plan Act

• The ERC is now available for recovery startup businesses. A Recovery Startup Business is a company that opened for trade or business during the pandemic (after February 15, 2020) and that has an average annual gross receipt amount that is less than $1 million. These companies may still be eligible for the ERC regardless of meeting the decline in gross receipts criteria or operation shutdown criteria.

• “Severely Financially Distressed Employers” are eligible for an additional benefit under the ARPA. An eligible employer would be one who underwent a 90% decline in gross receipts in a given quarter compared to the same quarter in 2019. Eligible employers with over 500 full-time employees are able to claim the ERC on all of the wages paid.

More information on what constitutes a full or partial shutdown can be found here.

A Refresher on Eligible Companies

The following groups may be eligible for the ERC under the ARPA if their operations declined or were reduced due to government-ordered shutdowns or they experienced a decline in gross receipts of more than 80% when compared to the same quarter from 2019. 

• Companies who received a PPP (Paycheck Protection Program) loan but the loan was not forgiven

• Severely Distressed Employers

• Recovery Startup Businesses

• Small Employer (businesses with 500 or fewer employees)

• Specific government employers that are colleges, universities, or organizations whose main purpose is medical or hospital care.

There is still time to claim the Employee Retention Credit for Q2 and prepare for claiming the credit for Q3 and Q4. Reach out to the Probity Tax Recovery Team if you have any questions on qualification or if you want more information.