Employee Retention Credit Extended

by | Mar 16, 2021 | Payroll, Tax

In order to help trades and businesses to retain employees and keep them employed during the COVID-19 crisis, the Coronavirus Aid, Relief, and Economic Security (CARES) Act created the Employee Retention Credit for 2020. As part of the Consolidated Appropriations Act, 2021 (CCA), the credit has been extended through June 2021.

The credit is actually a government-sponsored program to keep workers employed and is funded by providing qualifying employers with a refundable credit against certain employment taxes equal to 70% (up from 50% prior to 2021) of the qualified wages that an eligible employer pays to employees after March 12, 2020, and before July 1, 2021.

If the employer’s employment tax deposits are insufficient to cover the credit, the employer may get an advance payment from the IRS by filing Form 7200, Advance of Employer Credits Due to COVID-19.

For each employee, up to $10,000 in wages (including certain health-plan costs) per quarter (versus $10,000 per year in 2020) can be counted to determine the amount of the 70% credit.

Claiming the Credit – In order to claim the new version of the Employee Retention Credit, eligible employers must report their total qualified wages and the related health-insurance costs for each quarter on their quarterly employment tax returns, which will be Form 941 for most employers. The credit is taken against the employer’s share of Social Security tax, but the excess is refundable under normal procedures. Call Key2 Accounting if you have further questions.

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