The credit is claimed on Form 941 as a reduction of payroll taxes. Practically speaking, for the first two quarters of 2021 organizations determine eligibility and the amount of the credit immediately after the end of the calendar quarter. We will keep our eyes open for further guidance. It is not clear to us if the retroactive eligibility requirement for quarters in 2020 remains at a 50% decline in gross receipts over the same quarter in 2019 or is reduced to a 20% decline in gross receipts. We expect IRS guidance will address this question. It is not clear whether an employer can use this rule to qualify for the ERC in the first two quarters of 2021 based solely on a decline in gross receipts during the first quarter of 2021. For example, an employer can satisfy the gross receipts test for the first quarter of 2021 in the following two ways: (a) first-quarter 2021 gross receipts fall by more than 20% compared to first-quarter 2019 gross receipts, or (b) fourth-quarter 2020 gross receipts fell by more than 20% compared to fourth-quarter 2019 gross receipts. For an employer that was not in business as of the beginning of the same calendar quarter in 2019, the baseline period is the corresponding calendar quarter in 2020.Īlternatively, an employer may elect to apply the gross receipts test for 2021 using gross receipts for the prior calendar quarter, compared to the corresponding calendar quarter in 2019.
Using 2019 as the baseline period will be more favorable for employers whose gross receipts declined during 2020. For 2021, an employer will satisfy the gross receipts test if quarterly gross receipts decline by more than 20% compared to the same calendar quarter in 2019. Below is an explanation from an article on from the law firm of Morgan Lewis:įor 2020, an employer satisfied the gross receipts test only if quarterly gross receipts declined by more than 50% compared to the same calendar quarter in 2019. The eligibility requirements are complicated. The employer must show a decline in quarterly gross receipts of 20% (decreased from 50%) as compared to the same quarter in 2019.The employer must have been fully or partially suspended by the government due to Covid-19 in the calendar quarter requesting the credit, OR.To qualify for the ERC, organizations must have 500 or fewer employees. See, we weren’t joking when we said this is worth your while to understand! Furthermore, you may be able to claim the credit retroactively for 2020 wages and healthcare not covered by a PPP loan.That’s up to $14,000 per employee over the first two quarters of 2021. The ERC increases to 70% (up from 50%) of up to $10,000 in wages per employee per quarter.The ERC now extends through June 30, 2021.The ERC could put serious dollars into your organization’s bank account.Įxpanded Eligibility and Benefits for the ERCįirst of all, the new bill expands ERC eligibility and benefits:
The Employee Retention Credit (ERC) is complicated, but grab a cup of coffee and read this section carefully. If you already applied for PPP forgiveness and had an EIDL advance withheld, check with your lender to see if you can have the advance forgiven. This provision is retroactive to the CARES Act which created the original PPP loan program. In other good news, if your organization received both an Economic Injury Disaster Loan (EIDL) and a PPP loan, the new bill states that the $10,000 EIDL advance will not reduce PPP forgiveness. EIDL Advance will not affect PPP Forgiveness New PPP loans cover more employee benefits:Īs in the original program, PPP loans are forgivable. The loan amount will be 2.5 times the average monthly payroll costs incurred or paid during the one-year period prior to the date of application or calendar year 2019.
PPP GROSS RECEIPTS TEST FULL
Has or will use the full amount of their first PPP loan.Most nonprofit employers may receive a second loan if they meet certain criteria: The Small Business Administration (SBA) is scrambling to issue regulations. The new bill kicks off a new round of Paycheck Protection Program (PPP) Loans. While the new bill includes many benefits, a few provisions are especially interesting for nonprofits. On December 27, 2020, a new Covid-19 relief bill called the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“the new bill”) was signed into law.
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