April 13, 2021

TO:                 , 

SUBJECT: Important Information on Employee Retention Credits for 2020 & 2021

Background

The Employee Retention Credit (ERC) was initially introduced in the CARES Act in 2020. The ERC is a refundable payroll tax credit for wages and health plan expenses paid or incurred by an employer whose operations were either fully or partially suspended due to COVID-19-related business disruptions and shutdowns which caused employers to experience a significant reduction in gross revenue. 

The Consolidated Appropriations Act of 2021 (CAA) extended the eligibility period of the ERC to June 30, 2021, increased the ERC rate from 50% to 70% of qualified wages, and increased the limit on per-employee wages from $10,000 for the year to $10,000 per quarter.

Additionally, employers that received a Paycheck Protection Program (PPP) loan and were previously prohibited from claiming the ERC may now qualify and can retroactively claim the ERC for 2020. The American Rescue Act signed by President Biden on March 11, 2021, extended the ERC for another six months to December 31, 2021, under similar terms as provided in the CAA.

Because so many APA members received PPP loans, we wanted to make certain that you are aware of these important tax credits. Consult your tax professional to take advantage of the ERC.

ERC Resources

The IRS has issued guidance documents that may be of assistance to you:

IRS guidance (January 26, 2021)

IRS guidance (April 2, 2021)

Advisory #2021-09