A recent expansion of the employee retention tax credit means a significant number of small businesses will now qualify.
Beginning on January 1, 2021 the credit expires on January 1, 2022. Previously, the credit was for 50% on $10,000 in qualified wages for the entire year, with a maximum of $5,000 per employee. The new credit jumps to 70% on $10,000 in wages per quarter. In other words, that means a maximum of $14,000 per employee through the first half of the year, ending June 30th.
Businesses now qualify if they experienced a decline in gross receipts of more than 20% in a quarter compared to the same quarter in the previous year.
In addition, more businesses will qualify with the expansion of the employee retention tax credit with a higher employee cap. While the credit used to be for businesses with 100 employee, it now applies to those with 500 or fewer.
And now employers can receive the tax credit even if they received a PPP loan. They just can’t double dip and use both for the same payroll expenses.
Employers are urged to take advantage of this expansion if they have chosen to keep employees on their payroll. Read more at the Internal Revenue Service website.