Dear Valued Clients and Friends of Burkhart & Company,

The Consolidated Appropriations Act, 2021 extends and expands the employee retention credit first created under the CARES Act. As these new rules allow many previously ineligible employers to qualify for the credit, we want to keep you informed. Below, we have compiled a summary of key items and changes of note that may affect you and/or your business.

Enhancement and Expansion

For calendar quarters beginning after December 31, 2020, the amount of the credit is increased from 50% to 70% of qualified wages. The limitation per employee is also increased from amounts paid up to $10,000 per year to amounts paid up to $10,000 per quarter. Eligible wages are paid between March 12, 2020, and July 1, 2021, extended from January 1, 2021.

Eligible Employer

The definition of an eligible employer has been expanded to include an employer that experiences a 20% decline (down from 50%) in gross receipts for the calendar quarter compared to the same quarter in 2019.

Qualified Wages

Qualified wages are based on the business’s average number of full-time employees in 2019. Small employers, those that had 500 or fewer employees (up from 100), may receive the credit for wages paid to employees whether or not they are providing services to the employer.

No Double Benefit

Wages that are paid for with forgiven Paycheck Protection Program (PPP) proceeds cannot qualify for the employee retention credit.

Because of the enhancements and expansion of the employee retention credit, your business may now have an opportunity to take advantage of this tax benefit. Please reach out to us with any questions or if you would like to discuss the employee retention credit and other business tax relief under the Consolidated Appropriations Act, 2021.