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Employee Retention Credit

As we approach the end of the first quarter of 2021, this might be a great time to evaluate whether your business may qualify for the employee retention credit in 2020 and 2021.  While companies who had a quarter-over-quarter (2020 vs 2019) reduction in gross receipts of at least 50% qualify for the 2020 credit, companies who didn’t have the necessary drop in receipts but were subject to a full or partial shutdown due to government order are also eligible.  As non-essential construction was shut down in the spring of 2020, many contractors in New York State may be eligible for this credit. Eligible employers can claim a credit of up to $5,000 per employee (50% credit on up to $10,000 of qualified wages) by amending the Form 941 for the period(s) in which the qualified wages were incurred.  While wages used to claim forgiveness on a PPP loan cannot be included in “qualified wages”, employers with excess wages remaining after claiming PPP forgiveness will not be precluded from claiming the credit.

An even more generous credit is available in 2021 for companies subject to government shutdown or who had a quarter-over-quarter (2021 vs 2019) reduction in gross receipts of at least 20%.  The 2021 credit is up to $7,000 per employee per quarter (70% credit on up to $10,000 of qualified wages). With Backlog tight industry-wide this may be a good time to look at your 2021 projections and budgets to determine what kind of impact the employee retention credit may have on your company.

If you have any questions on eligibility or the calculation of the credit please reach out to your TBC advisor.

Teal, Becker & Chiaramonte Certified Public Accountants