![]() ![]() The IRS’ Revenue Procedure 2021–33 specifies that Shuttered Venue Operator Grants, Restaurant Revitalization Funds (RRF), and similar loans may not be counted as gross income when determining eligibility for the ERC. ERC wages interaction with PPP loans, SVOG grants, and similar funding There can be nuances in the definition of gross receipts at the state level so be sure to consult with your accountant to determine whether other income not listed above is included in your company’s gross revenue. Other income producing assets or activities.Gross receipts generally include the following types of income: The IRS defines gross receipts as “the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses.” What are gross receipts under the ERC gross receipts test? In 2021, you can qualify for the ERC if your quarterly gross receipts decreased by 20% or more when compared to the same quarter(s) in 2019. The ERC gross receipts test is the most straightforward way to qualify for the Employee Retention Tax Credit though the specific definition of “decline” is different for 20.įor 2020, you can qualify for the ERC if your gross receipts for any quarter decreased by at least 50% when compared to the corresponding 2019 quarter. While we’ve already covered the suspended operations test, I’m going to cover the ERC gross receipts test in this article. ![]() There are two ways to qualify for the ERC, including the gross receipts test and the suspended operations test. The ERC is a refundable payroll tax credit that was introduced in the CARES Act in 2020 and subsequently updated by the Taxpayer Relief Act, the American Rescue Plan, and the Infrastructure and Jobs Act. *This is part of an ongoing series on the employee retention credit.You’re likely familiar with the Employee Retention Tax Credit (ERC), either because you’ve heard about lucrative payouts or you’ve seen or heard an ad about it. Please do not confuse this with the 25% gross receipts decline when determining eligibility for the Second Draw PPP loans. Qualifying for the ERC is also easier in 2021, since the gross receipts test for eligibility has been reduced from a 50% comparative quarterly decline to a 20% decline. For eligible employers, the ERC has been increased to $7K per quarter per employee, which is based on 70% of the first $10K of qualified wages per quarter. President Biden’s American Rescue Plan has further extended the ERC once again making this important opportunity available through the end of the year. Determining the right length of the covered period between eight and 24 weeks is critical for maximizing the tax benefits of PPP and ERC.Īs part of the CAA, the ability to claim the ERC was originally extended until Jand even on better terms for the employer. All eligible businesses need to analyze their payroll costs on a quarterly basis, so they can attempt to get 100% forgiveness on their PPP loan and also maximize the value of their ERC. For the same quarter, payroll can be counted toward either ERC eligibility or PPP loan forgiveness, but certainly not both. Eligible employers can claim the ERC on any qualified wages that are not counted in payroll costs when applying for PPP loan forgiveness. However, there are a few very important caveats. The CAA states that retroactive to March 12, 2020, any employer eligible for the ERC can now claim the ERC, even if they also received a PPP loan. Tax Beneficial Provisions for PPP and ERC However, this all changed with the passing of the $900 billion Consolidated Appropriations Act, 2021 (“CAA”), which was signed into law on December 27, 2020. Originally, recipients of PPP loans were not eligible to claim the ERC. For 2020, the ERC was capped at $5K per eligible employee, which is based on 50% of the first $10K of qualified wages. The original CARES Act created a refundable payroll tax credit for employers that retained their employees during the period Mathrough the end of the year despite the economic impact of the pandemic on their business. The forgiveness of the PPP does not create gross income for the borrower and all expenses paid for with PPP monies are fully deductible for tax purposes. These loans can be totally forgiven as long as they are used for the intended purposes of payroll, rent, utilities, mortgage interest and/or certain covered operations expenditures, property damage costs, supplier costs and worker protection expenditures. By now, most of us are familiar with the terms of the PPP loans created as part of the CARES Act. ![]()
0 Comments
Leave a Reply. |