Before the December 27, 2020, enactment of the new COVID-19 relief law, you may have chosen to participate in the Paycheck Protection Program (PPP) loan and not given much thought to the employee retention credit.
Under the original law, you had to choose between the retention credit and the PPP loan. Millions of businesses chose to go the PPP loan route.
The game has changed. You may, as a PPP recipient, qualify to take the employee retention credit retroactively for tax year 2020 quarters and also going forward in tax year 2021.
Here are the key changes to the laws that you as a PPP recipient need to understand:
- PPP loan recipients may be able to 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, will qualify for the retroactive credit
- Wages paid from January 1, 2021, through June 30, 2021, can qualify for a significant 2021 credit
- For 2021 quarters only, you qualify for the credit if your business experienced (a) a full or partial suspension of the operation of its trade and/or business during this period because of governmental orders limiting commerce, travel or group meetings due to COVID-19, or (b) a decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80 percent of the gross receipts in the same calendar quarter in 2019
- For 2021 quarters only, the relaxed requirements for qualifying wages apply to businesses with 500 or fewer full-time employees in 2019.
Understanding all of the laws and changes that take place can be complicated. At Michael Callahan and Associates, we are well versed on the laws and the changes that take place (as they take place). For help in understanding what opportunities you have, give us a call today.