The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 is a $900 billion relief package to deliver a second round of economic stimulus for individuals, families, and businesses. This legislation provides relief through multiple measures and expands many of the provisions already put into place under the CARES Act.
Here is a recap of the Employee Retention Credit under the CARES Act and the higher-impact modifications under the latest COVID-19 Relief Package.
CARES Act - Employee Retention Credit
Up to $10,000 of wages per employee
Payroll credit of up to 50 percent of qualifying wages paid after March 13 through Dec. 31, 2020
You reduce federal tax deposits for withholdings related to payroll
If the deposits are not enough to cover the credit you can apply for an advance
How to report the credit:
Form 7200 was available to request an Advance Credit for the first quarter of 2020 tax reductions (qualifying wages from March 13 to March 31).
Federal Form 941 (effective for Quarter 2) can be used to report any credits for qualifying wages between Quarter 2 and Quarter 4 of 2020.
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Employee X wages in Quarter 1, 2 and 3 = $50,000.
PPP Loan used for $20,000
Sick pay credits used for $2,000
Which leaves $28,000 available for ERC.
Limited to $10,000 = ERC of $5,000.
Or are total wages limited to $10,000 and since all used for PPP loan, no ERC available?
Assuming that the company was an Eligible Employer during the entire period (Through Government Orders or a >50% decline in Gross Receipts) and that the company had less than 100 Full Time Employees per their 2019 average, where you can include all wages, the remaining $28K of wages would be available for the ERC. That in turn would be capped at $10K and at 50%, the ERC would be $5K.
However, if they had over 100 Full Time Employees per their 2019 average, they would only be able to include Qualified Wages (Wages paid for no services) during the time that they were an Eligible Employer. That may or may not overlap with the PPP Forgiveness Period or when the FFCRA was claimed. That could result in a much different answer.
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I would like others opinion on this example:
Employee X wages in Quarter 1, 2 and 3 = $50,000.
PPP Loan used for $20,000
Sick pay credits used for $2,000
Which leaves $28,000 available for ERC.
Limited to $10,000 = ERC of $5,000.
Or are total wages limited to $10,000 and since all used for PPP loan, no ERC available?
Assuming that the company was an Eligible Employer during the entire period (Through Government Orders or a >50% decline in Gross Receipts) and that the company had less than 100 Full Time Employees per their 2019 average, where you can include all wages, the remaining $28K of wages would be available for the ERC. That in turn would be capped at $10K and at 50%, the ERC would be $5K.
However, if they had over 100 Full Time Employees per their 2019 average, they would only be able to include Qualified Wages (Wages paid for no services) during the time that they were an Eligible Employer. That may or may not overlap with the PPP Forgiveness Period or when the FFCRA was claimed. That could result in a much different answer.