Most employers rarely considered the Employee Retention Tax Credit in favor of Paycheck Protection Program loans before the December 27, 2020 enactment of the new COVID-19 relief law.

But now the game has changed. You may, as a PPP recipient, qualify to take the employee retention credit retroactively for tax year 2020 and also going forward in tax year 2021.

Here are the key changes you as a PPP player need to know:

  • PPP loan recipients can retroactively claim the 2020 employee retention credit for wages not paid with forgiven PPP loan proceeds.
  • Wages paid from March 13, 2020, through December 31, 2020, qualify for the retroactive credit.
  • Wages paid from January 1, 2021, through June 30, 2021, can qualify for the more significant 2021 credit.
  • For 2021 quarters only, you qualify for the credit if your gross receipts for a calendar quarter are less than 80% of gross receipts from the same quarter in tax year 2019. Alternatively, you can elect to qualify for a quarter by comparing the gross receipts oif the immediately preceding quarter with the corresponding quarter in 2019.
  • For 2021 quarters only, the relaxed requirements for qualifying wages apply to businesses with 500 or fewer 2019 full-time employees.

For more background information on the Employee Retention Tax Credit, other COVID-19 related tax credits, and tax relief, please visit NEW COVID-19 Self Employment & Payroll Tax Credits.

If you want help maximizing your forgiveness and tax credit amounts with tax planning strategies, and if you’re wondering about how this will affect your financial reports, please contact me for support.

Page Updated 9/19/2022