Many business and non-profit employers are finally feeling like they’re beginning to round the corner of the COVID-19 crisis and are now fully focused on successful recovery. Critical to this recovery is ensuring that your organization doesn’t miss out on any of the valuable 2021 COVID-19 relief and tax credit opportunities, including the Employee Retention Credits. Be sure to quickly review the following financial reporting to determine if you need to take action:

  1. Determine your quarterly gross revenue/sales (total revenue before expenses) for 2019, 2020, and 2021

  2. Compare your quarterly gross revenues for the following calendar quarters:

    • 4th Quarter 2020 compared to 4th Quarter 2019

    • 1st Quarter 2021 compared to 1st Quarter 2019

    • 2nd Quarter 2021 (projected) compared to 2nd Quarter 2019 

  3. If the 2020 4th quarter or any of the 2021 quarters, when compared to the same quarter in 2019, reflect a greater than 20% reduction in gross revenue/sales, you are likely eligible for the Employee Retention Credits.

The big question for eligible employers is, of course, “How much?” Qualified employers are eligible for up to $7,000 of fully refundable payroll tax credits per employee, per calendar quarter, totaling up to $28,000 in potential credits per employee for the 2021 tax year. In addition, business and non-profit employers that qualify for one quarter will also qualify for the following quarter, even if their gross revenue/sales increase. 

For example, let’s assume an employer experienced a reduction in gross revenue/sales of 25% for 1st quarter 2021 compared to 1st quarter 2019.  That employer has 40 full time employees who all earned over $10,000 in qualified wages during 1st quarter 2021. Because the employer meets the gross receipts eligibility test for 1st quarter 2021, they would be eligible for up to $280,000 in refundable payroll tax credits ($7,000 in total credits for each of the 40 employees) in 1st quarter 2021. In addition, the employer’s eligibility for 1st quarter 2021 makes them automatically eligible for the credits in 2nd quarter 2021 and, assuming payroll costs and employee headcount remains the same, eligible for another $280,000 in credits for 2nd quarter 2021, even if their gross receipts don’t meet the 20% reduction test for 2nd quarter.

Think your business or nonprofit organization may qualify? Reach out to our advisors today to discuss your unique situation and how you may be able to take advantage of these important and significant tax credits.

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