We have heard from many members expressing concerns and asking questions about the Employee Retention Tax Credit (ERTC). We have formed a working group of the Federal Government Affairs Committee to address the issue, and will continue to seek a legislative fix. Below you will find several helpful resources for you and your clients.
You are also encouraged to join our member forum discussion group on the ERTC to engage with fellow members. For more information contact Thom Stohler.
Resources from NAPEO members:
- Form for clients to report ERTC
The ERTC was created by the CARES Act in March. It was extended and modified by the Consolidated Appropriations Act of 2021. Here’s how that law modified the ERTC.
- Repeals the provision denying the ERTC to employers receiving a PPP loan. Instead, mechanisms would be created to prevent the same wages from being used for both PPP loan forgiveness and the ERTC.
- Extends the ERTC to apply to wages paid before July 1, 2021 (instead of January 1, 2021).
- Increases the credit percentage from 50 percent to 70 percent of applicable wages.
- Increases the per-employee limitation on applicable wages from $10,000 total to $10,000 per calendar quarter. In combination with the increased credit percentage, this would increase the maximum credit per employee from $5,000 to $7,000 per quarter (up to $14,000 for the first two quarters in 2021).
- The following language was added to the ERTC provisions that specifically addresses PEOs:
Any forms, instructions, regulations, or guidance described in paragraph (2) shall require the customer to be responsible for the accounting of the credit and for any liability for improperly claimed credits and shall require the certified professional employer organization or other third-party payor to accurately report such tax credits based on the information provided by the customer. [Emphasis added.]
It is not clear whether this provision applies retroactively or just to new credits taken in 2021.
- Makes the ERTC available if the business experienced a decline of at least 20 percent in gross receipts (instead of a 50 percent decline) as compared to the same calendar quarter in the prior year.
- Modifies the small employer definition of qualified wages to apply to employers that have 500 or fewer employees (instead of 100 of fewer employees).