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Contractors and the Employee Retention Credit

Anthony Campolo, Dana Fried

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.

Contact:

Anthony J. Campolo, CPA, Partner, Construction

914.922.2126

Dana Fried, JD, LLM, Managing Director, National Tax Services

516.417.5064

Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.