Employee Retention Tax Credit- Understanding changes made by the Credit Consolidated Appropriations Act
You may have seen or read about the Employee Retention Tax Credit (ERC) that was introduced with the CARES Act and clarified by the recent Consolidated Appropriations Act (CAA). The short version is, if your business was shut down or severely impaired by COVID-19, you may have an opportunity to claim a 50% credit for wages paid to employees between March 13, 2020, and December 31, 2020. The maximum wage credit is $5,000 per employee.
There is some interplay between PPP loan forgiveness and ERC though that you need to consider. You cannot claim PPP loan forgiveness and the ERC on the same wages. But, with the 24-week forgiveness period for PPP, you might have ample wages to qualify for full PPP forgiveness AND maximum ERC.
Greg Butler with the accounting firm Wipfli does a nice job of laying out the program in this article. Please take a look and let us know if we can assist you in navigating your way to a nice tax outcome.