Employee retention credit for contractors: are you eligible?

Since March 2020, there have been a number of stimulus offers available to present funding to employers impacted by COVID-19. Many contractors took advantage of the Paycheck Safety Software (PPP) loan and the Financial Harm Catastrophe bank loan. On the other hand, the Staff Retention Credit score (ERC)  is yet another program contractor’s should really contemplate. 

If you haven’t listened to of the ERC, you are not on your own, numerous companies are not aware of the credit score because they in the beginning did not qualify. When this credit was originally enacted by way of the CARES Act, PPP recipients were being prohibited from participating. On the other hand, this restriction was lifted on December 27, 2020 by the Consolidated Appropriations Act of 2021, probably opening the ERC up to in excess of a million a lot more businesses.

As of the date of this write-up, the ERC is primarily based on wages paid to staff of the organization from March 13, 2020 via December 31, 2021. Qualifying businesses can receive up to $5,000 for every worker for 2020 and $28,000 per employee for 2021. The U.S. Senate just lately passed the infrastructure invoice which is currently with the U.S. House of Representatives. This bill involves a provision to move the finish date of qualified wages for the ERC to September 30, 2021, in its place of December 31, 2021.

Companies can qualify by possibly:

  1. Going through a entire or partial suspension of organization functions thanks to orders from an proper governmental authority due to COVID-19,  OR
  2. A reduction in gross receipts, as described further more under

Through the preliminary months of the pandemic, several construction websites have been either briefly shut down or substantially delayed because of to authorities mandates. These forms of interference with occupation development could result in sure contractors qualifying for the ERC. An example of this was when the Town of Boston introduced on March 16, 2020 that specified non-crucial design positions have been temporarily shut down. On May possibly 18, 2020 this postponement was lifted for some careers, though other folks ongoing to be held up for several extra weeks. Contractors that experience they may have skilled a partial affect because of to COVID-19 need to totally review their eligibility for the ERC.

The reduction in gross receipts qualification is dependent on no matter whether an employer is wanting to qualify for the 2020 or 2021 ERC. In purchase to qualify for the 2020 ERC, a organization would have to have to exhibit at the very least a 50% reduction in gross receipts in any quarter of 2020 when compared to that identical quarter in 2019.  For 2021, even so, the demanded gross receipts reduction to qualify is only 20% when comparing any one quarter or the straight away previous quarter to the exact same quarter in 2019.

Subsequent step just after confirming qualification is calculating the credit rating, which is distinctive for 2020 vs. 2021. The 2020 ERC is 50% of qualified wages and health care charges up to $10,000 per personnel, consequently potentially up to $5,000 per staff. The 2021 ERC is 70% of eligible wages and health care expenditures up to $10,000 for each worker for every quarter, consequently possibly up to $7,000 for every worker for each quarter or $28,000 for the whole calendar year. For illustration, a contractor with 50 workforce could qualify for up to $1,650,000 of ERC concerning 2020 and 2021. An critical observe is the definition of suitable wages is different for people who are deemed “large employers” underneath the ERC, as these employers are only ready to receive a credit score for wages compensated to employees not furnishing services. The definition of a substantial employer for the 2020 ERC is any employer that averaged extra than 100 complete-time staff through 2019. For the 2021 ERC, large companies are people that averaged far more than 500 entire-time employees through 2019.

To claim the credit score, eligible firms can withhold necessary deposits for specified payroll taxes – credits in excess of the businesses’ quarterly legal responsibility could both ask for a refund or a credit rating to be carried ahead on their authentic, timely submitted quarterly 941. For those enterprises who have determined their eligibility after the first submitting of the Type 941, an amended payroll tax return would be expected to be submitted, which would contain a request for a refund for the credit score total.

Withum has helped contractors all in excess of the nation in help with the ERC. If you imagine your business may possibly be eligible, remember to get to out to your advisor or contact us below. Obtain out if you are suitable now.