Multiple COVID-19 bills have been pushed through Congress over the past year, offering ongoing financial relief for both businesses and individuals. As these circumstances are constantly changing, have you been able to keep up with the tax credits and available support for your business?

Under the first Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020, an employee retention tax credit was introduced. This act provided financial resources to employers who kept employees on the payroll during the pandemic. In December 2020, new legislation (known as the Consolidated Appropriations Act) was enacted to modify this employee retention credit, offering additional tax benefits to many businesses.

Employee Retention Credit: What You Need to Know

The original legislation provided a credit of 50% for qualified employee wages, as well as the cost of continuing to provide employee health benefits. An annual credit cap was placed at $5,000 per employee.

Effective January 1, 2021, this credit increased to 70% of qualified wages plus the continuing costs for providing health benefits. Additionally, the cap increased to $7,000 per employee through the end of 2021. Even if the employer received the maximum employee retention tax credits in 2020, companies can still qualify for the 2021 credit.

Do You Qualify for These Tax Credits?

Do these tax credits apply to your business? Here are a few of the most notable changes that happened under the Consolidated Appropriations Act:

  • PPP Loan Recipients: Businesses that received the PPP loans can now also access the employee retention credit. Wages paid with funds from a forgiven PPP loan aren’t eligible for this tax credit.
  • Expanded Entities: The new legislation expands eligibility to cover additional entities, including universities and public colleges, organizations offering hospital or medical care, and certain organizations with Congress chartering (such as Federal Home Loan Banks, FDIC, etc.).
  • Gross Receipts Definition: The new law also expanded the definition for tax-exempt entities for gross receipts, now including investment income, sale of assets, assessments or dues, grants, gifts, and contributions.

Personalized Tax Strategy for Your Business

These tax credits and laws can be complicated, which is why it’s best to work with an experienced team to determine your eligibility. For more information, talk to our team at ReFOCUSed Business Consulting. We support your business through customized services based on the unique requirements you need.