New Bill Provides Significant Changes to Employee Retention Credit (ERC)

The recent COVID-19 relief legislation extended the ERC through 6/30/2021, with eligibility modifications beginning in 2021. The ERC is in place to incentivize businesses that have been impacted by COVID-19 to retain employees. This credit may result in a large benefit to businesses that were partially or fully closed in 2020 or 2021, or that experienced a decline in revenues above certain thresholds.

A major change to the ERC retroactive to 2020, and going forward into 2021, is that taxpayers who received a PPP loan are now eligible to claim the ERC for quarters in which they meet the eligibility requirements.  

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  • Wages paid to certain owners or their relatives do not qualify for the ERC.
  • Qualified wages include allocable healthcare costs, which now include healthcare costs paid to employees who did not receive wages during the applicable quarter. Payroll costs a taxpayer used to claim the ERC are not eligible to be forgiven as part of the PPP process.
  • Payroll costs a taxpayer used to claim the FFCRA paid sick and family leave credits are not eligible to be used as qualified wages for the ERC.

 

 

A number of issues remain in need of further guidance including ERC wages relative to forgiveness of PPP loans; determination of wages eligible for ERC in 2020; and how employers retroactively claim ERC for 2020.

If you have any questions regarding ERC updates, please email or call your Lopata, Flegel & Company contact, or call the firm at 314 514 8881.