Guest blog by Misty Leinberger, Pixel Financial Group

We were all holding our breath at the end of 2020, just waiting to see if Congress would pass a new COVID Relief program before the holidays and just what it would contain. Well, it finally happened a couple of days before Christmas and it was signed into law a couple of days before New Year’s. Whew! That was close! Of course, everyone was excited to hear about the forgivable PPP loan, but I was just as excited to learn about the Employee Retention Tax Credit (ERTC), which was largely ignored by the popular media and accountants. The reason for this is because you couldn’t use the PPP and the ERTC. It was one or the other and, in most cases, the PPP made more sense. However, the new COVID Relief package has changed this! Small businesses can now use both!

You can also join Misty on Facebook on Monday February 8 to hear her discuss the new ERTC! https://www.facebook.com/events/335596160997184

Here is the New ERTC:

Who Qualifies:

First and foremost, this is only going to apply to businesses who have employees. If you are self-employed, this isn’t going to work for you. Second, your business qualifies if it was ordered closed or partially closed because of COVID restrictions OR if your gross receipts fell below 80% of the same quarter in 2020. There are a lot of wrinkles to these qualifications and they are determined on a quarter by quarter basis, so make sure you’re working with your accountants and payroll specialists!

What is it for?

Essentially, the credit is intended to alleviate some of the employer taxes (Medicare and Social Security) that accompany paying employees and the benefit for the credit is immediately available. Small businesses should be relying heavily on their payroll specialists to navigate the reporting requirements.

How Much:

Always the burning question! Previously, the ERTC was capped at 50% of each employee’s gross wages up to $10,000 per employee, and this still applied to 2020 wages. However, for January 1st – June 30th of 2021 the credit allows for 70% of each employee’s gross wages up to $14,000 per employee. Here’s an example:

Employee: 

Q1 Gross Wages = $15,000

Credit = 70% of $15,000 = $10,500

Credit allowed = $10,500

Q2 Gross Wages = $15,000

Credit = 70% of $15,000 = $10,500

Credit allowed = $7,000 ($21,000 total calculated credit – $14,000 cap)

How It’s Claimed:

It’s claimed each quarter through the 941s that are filed by simply not paying the employer taxes calculated and checking the box that says that’s exactly what you’re doing. Seems simple, but, again, I HIGHLY recommend you rely on your payroll providers to help you through this process!