Review the recently released cost-of-living adjustments (COLA) as released by the Internal Revenue Service, taking effect January 1, 2021. ...
In March 2020, the CARES Act created the Employee Retention Credit (“ERC”), which allowed qualifying employers of any size to claim a refundable payroll credit for up to 50% of qualifying wages, with a maximum of $10,000 per employee ($5,000 of credit).
Congress has now passed The Consolidated Appropriations Act (“the Act ”) , signed by President Trump on December 27, 2020 which provides nearly $900 billion in additional aid to families, businesses, and individuals. The Act significantly expands the ERC’s eligibility in 2020 and the actual credit dollars available for employers for the first two quarters of 2021.
The Act includes new, expansive provisions for advance payments of the ERC to small employers (less than 500 employees). The Treasury and the SBA are expected to issue guidance explaining that payroll costs paid during the PPP covered period can be treated as qualified wages, as long as those wages were not paid from the proceeds of a forgiven PPP loan. The Act also allows employers to take the ERC for bonuses paid to essential workers.
The CARES Act required employers to pick either a PPP loan or the ERC and did not allow them to take advantage of both programs. An encouraging piece of the new legislation is Section 206(c) which provides that employers that received PPP loans can now qualify for the ERC with respect to wages that are not paid for with proceeds from a forgiven PPP loan. In theory, an employer who received a PPP loan should consider reviewing their forgivable expenses to allow for a larger pool of “qualified wages” to possibly be utilized for the ERC if the employer qualifies. Section 206(c) applies retroactively, as if it were included in the CARES Act.
Due to the obvious allure of a forgivable loan with the PPP, many businesses disregarded the ERC because they could derive more benefit from the PPP. Now, with the ERC back in play even for PPP borrowers, it is necessary for every borrower to quickly determine if they are eligible for the ERC, and if so, to determine the interplay with PPP loan forgiveness.
We will continue to provide more information on the ERC and its interaction with PPP forgiveness as it becomes available.
For additional information or assistance with the Employer Retention Credit, reach out to any of your contacts at Schneider Downs or contact Matthew Werner at mwerner@schneiderdowns.com or Ross Alessandro at ralessandro@schneiderdowns.com.
Review the recently released cost-of-living adjustments (COLA) as released by the Internal Revenue Service, taking effect January 1, 2021. ...
Learn more about the PPP Loan Forgiveness and Deductibility of Expenses and what is included in taxable income for Pennsylvania. ...
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