Contractors and the Employee Retention Credit
Updated 5/6 to reflect new information regarding 2021 Q3/Q4 and to clarify questions regarding 2020 and 2021 eligibility
Good news for contractors (and all employers): Recent law changes have permitted Paycheck Protection Program (PPP) loan recipients to obtain Employee Retention Credits (ERCs), and extended and expanded the credit for 2021.
Most building contractors in New York City experienced a partial suspension of operations due to a governmental order because of COVID-19. The related relief programs and tax credits all have varying impacts relating to a contractor and taxes. This one is no different.
The December Consolidated Appropriations Act of 2021 provided for both retroactive applicability of the ERC for 2020 and extending and expanding the ERC for the first two quarters of 2021, and liberalized the ERC requirements for 2021. Significantly, it made it so that an employer that did not take an ERC for 2020 because it or its controlled member received a PPP loan may now be eligible for ERCs for 2020.
Now, as of the March 11 passage of the American Rescue Plan Act, the ERC is available for all four quarters of 2021. The newer Act extended the availability of the ERC to the third and fourth quarters of 2021, each with its own $10,000-per-employee maximum amount of Qualified Wages/Qualified Health Plan expenses, and also added new ERC eligibility opportunities for 2021 Q3 and Q4 for “recovery startup businesses” and “severely financially distressed employers," among other changes.
Register to access our full ERC explanation, which includes “decision trees” for both 2020 and 2021 that help guide you through your eligibility and how much credit you may be eligible for.
Anthony J. Campolo, CPA, Partner, Construction
Dana Fried, JD, LLM, Managing Director, National Tax Services
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