Employee Retention Credit (ERC)

About the ERTC Program

President Biden has signed the infrastructure bill which contains a provision that ends the Employee Retention Tax Credit (ERTC) at the end of the third quarter of 2021, one quarter earlier than under prior law. Most employers should not claim any ERTC on the Form 941 for Q4 2021, with one exception for a “recovery startup business.” Employers that meet this definition could still claim the ERTC for Q4 2021 (if otherwise eligible).

As amended by the infrastructure bill, a recovery startup business means any employer: which began carrying on any trade or business after February 15, 2020, and for which the average annual gross receipts of such employer (as determined under rules similar to the rules under Code section 448(c)(3)) for the 3-taxable-year period ending with the taxable year which precedes the calendar quarter for which the ERTC is determined does not exceed $1,000,000.Employers may continue to claim the ERTC for Q1-Q3 2021 if they are eligible. The amendments made by the infrastructure bill only affect the ERTC with respect to Q4 2021. 

The IRS has not yet released any information regarding the implications of the ERTC’s early termination for any employers, including PEO clients, that reduced their payroll deposits earlier this quarter in anticipation of claiming the ERTC for Q4 2021, or that received an advance payment using Form 7200 with respect to Q4 2021.

The ERTC provision provides a refundable payroll tax credit for up to 50 percent of the first $10,000 of wages ($5,000 max per employee) paid by employers to employees during the COVID-19 crisis.

  • For eligible employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above.
  • For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order.

Changes to the Employee Retention Tax Credit (ERC)

  • Repeals the provision denying the ERTC to employers receiving a PPP loan.  Instead, mechanisms would be created to prevent the same wages from being used for both PPP loan forgiveness and the ERTC.
  • Extends the ERTC to apply to wages paid in all four quarters of 2021 (instead of January 1, 2021).
    • For 2021, the employee retention credit (ERC) is a quarterly tax credit against the employer’s share of certain payroll taxes. The tax credit is 70% of the first $10,000 in wages per employee in each quarter of 2021. That means this credit is worth up to $7,000 per quarter and up to $28,000 per year, for each employee.
  • Increases the credit percentage from 50 percent to 70 percent of applicable wages. 
  • Increases the per-employee limitation on applicable wages from $10,000 total to $10,000 per calendar quarter. In combination with the increased credit percentage, this would increase the maximum credit per employee from $5,000 to $7,000 per quarter (up to $14,000 for the first two quarters in 2021).
  • The following language was added to the ERC provisions that specifically addresses PEOs:
    Any forms, instructions, regulations, or guidance described in paragraph (2) shall require the worksite client (not the PEO) to be responsible for the accounting of the credit and for any liability for improperly claimed credits and require the professional employer organization or other third-party payor to accurately report such tax credits based on the information provided by the customer. 
  • Makes the ERTC available if the business experienced a decline of at least 20 percent in gross receipts (instead of a 50 percent decline) as compared to the same calendar quarter in the prior year.
  • Modifies the small employer definition of qualified wages to apply to employers that have 500 or fewer employees (instead of 100 of fewer employees).
  • The worksite employer must attest in writing that they qualify and state which quarters they qualify for. ERC eligibility is determined on a quarterly basis
  • Employers may not take the credit on wages that were covered by their PPP loan.  Thus, the employers must certify to the PEO that they have done the analysis and they are not “double dipping”. 

Take the quick eligibility pre-interview quiz

1Basic ERC Qualification Questions
2Company Contact Information and Acknowledgements

Please use the form below to formally submit your tax credit request schedule by quarter. Because eligibility is generally determined by quarter, a separate request must be submitted for each quarter.

  1. Signed 2020 attestation executed by an authorized representative of the company.
  2. Determine what time period you are eligible for (Q2, Q3, Q4 etc.) We will need specific dates you will need data for to determine your exact credit.  It is extremely important for you to determine the wages covered by any PPP loan as those same wages can’t be used for the ERC.  
  3. Advanstaff will provide the data necessary to calculate the credit.
  4. All credit calculations must be complete and approved by you by 06/1/2021.
  5. Advanstaff will file one form 941X for all client companies and request a refund for taxes paid. 
  6. Advanstaff will refund those credits to clients upon receipt of the funds from the IRS.

We expect that it will take some time to receive the refund.  Any client not meeting the 06/01/2021 deadline for the 2020 credits will be charged an additional fee of $750 for each 941X we must file.  It is VERY important we only do this once.

  1. Signed 2021 attestation executed by an authorized representative of the company. (see attached Year 2021 required form)
  2. Determine what time period you are eligible for.  We will need specific dates you will need data for to determine your exact credit.  It is extremely important for you to determine the wages covered by any PPP loan as those same wages can’t be used for the ERC.  
  3. Advanstaff will calculate Q1 taxes based on the dates presented and reduce your taxes payable on the subsequent payroll.  This will be the same process for Q2.   
  4. For those who have already paid in taxes and your credits EXCEED the liability paid you will have two options to receive the additional credits.  Please work with your CPA or tax advisors to determine the best method to do this while we await further guidance from the IRS.  Advanstaff can only refund what has been PAID not incurred. 

Submit ER Forms to AdvanStaff HR Accounting / Tax Dept Below

Acknowledgements:

Click or drag files to this area to upload. You can upload up to 10 files.
Please attach your employee roster worksheet. Include employee name and credit amount claimed for each employee.

Please understand these credits are client by client based and it is your responsibility to affirm your eligibility as you are ultimately responsible for the validity of the credits claimed.   If you have any questions regarding the procedures please feel free to reach out to me.  We hope these credits will offer some added relief to you during these unprecedented times.

Thank you,

Lisa HallCPA
Controller