Employee Retention Tax Credit Eligibility - 2020 & 2021 Self Evaluator

The following information and resources are designed to assist in determining your eligibility for the Employee Retention Tax Credit (ERC).  The ERC allows employers to receive a Federal tax credit for money paid out as wages to employees.  If you are eligible, the current maximum credit you could receive for 2020 is $5,000 per employee for the entire year of 2020.  For 2021 the max credit is $7000 per Employee per quarter ($14,000 per EE if applied Q1 and Q2 of 2021).  Both years mandate that you cannot apply PPP loans and ERC on the same wages, however you can use both independently of each other which is something we specifically can facilitate on your behalf to maximize the ERC credit and still meet the guidelines for PPP forgiveness. 

 

Below is a link to a spreadsheet designed to assist in determining if you can define your business as eligible by the guidelines pertaining to the  gross receipts eligibility criteria. In order to use the excel sheet, you will need your gross receipts from 2019 and 2020 for all 4 quarters of each year. 

If you compare gross receipts per quarter and find that you are not eligible you can also be eligible in the following manner: a full or partial shutdown that effects your ability to operate in full.  This shut down would need to have been based on local, state, or federal legislation.  You may not cite news or media outlets; this must be passed legislation that can be documented.  If you feel you fall into this category for your scope of business, you can record the dates of the legislation passed that affected you and apply the credit during those dates. 

 

For reference purposes see the examples below of common scenarios regarding gross receipt eligibility criteria:

 

Q2 of 2020 has a reduction of 60% gross receipts and the client enters into ERC.  This specific client may remind under the credit for the following quarter.  If they maintain 20% or higher reduction in each quarter after the initial entrance at 50%, they would not be required to exit the credit.  Continuance in the reduction of gross receipts at 20% or higher per quarter, the credit will remain in effect and this client would not be require to exit the credit.

 

 

Q2 of 2020 has a reduction of 60%, however, in Q3 this client only has a 10% reduction.  This would mean at the END of Q3 this client would need to exit(but still allowed to apply the credit until the end of Q3).  When Q4 starts exiting the credit would be required.

 

 

Legal Notice:  These and all other resources pertaining to the Employee Retention Tax Credit are intended for informational purposes only and do not constitute legal advice. Further, Absolute Payroll cannot determine your specific organizations eligibility. You are responsible for independently determining and confirming your organizations eligibility.