The employee retention credit, originally enacted in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and later updated by the American Rescue Plan Act of 2021 is still available for eligible employers. This credit was greatly expanded for the 2021 tax year, with enhancements such as:
- Increased credit amount of 70% of qualified wages;
- Increased maximum per employee qualified wages to $10,000/quarter;
- Permitted for recipients of PPP loans (exception for wages that are paid with forgiven PPP proceeds);
- Allowed group health plan expenses as qualified wages regardless of other wages paid;
- Increased “large employer” threshold to more than 500 full-time employees (note: employers below this threshold may calculate the credit on qualifying wages paid to employees without regard to whether or not the employee was providing services in exchange for the wages); and
- Decreased “significant decline in gross receipts” threshold to 20%, and permitted calculation of decline quarter-over-quarter or year-over-year.
Lastly, it is important to note that there is currently a proposal on the Hill to remove the availability of this credit for the fourth quarter of this year. This proposal, put forth in the infrastructure deal made earlier this summer, could limit your potential opportunity through only this month.
As always, we at First Advantage will continue to monitor all IRS guidance and all future legislative action. Please ensure you are subscribed to our Tax Alerts to stay informed! If you have any questions on the programs discussed in this alert and how they might impact you, please contact your First Advantage Tax Consultant or your legal counsel.