Using the ERTC as Part of the Business Survival Toolkit

Many small businesses stayed viable during the pandemic by receiving Paycheck Protection Program (PPP) loans, SBA-backed loans that often do not require repayment. Eligible employers also may be eligible to apply an employee retention tax credit (ERTC) to reduce their tax liabilities where gross receipts for a calendar quarter have declined by a certain percentage as compared to a prior calendar quarter. New guidance under Revenue Procedure 2021-33 provides safe harbor parameters with respect to wages paid after June 30, 2021 and before January 1, 2022. During this time span, an employer may exclude the amount of the forgiveness of a PPP loan and the amount of any ERTC-coordinated grants from its gross receipts in determining eligibility to claim the ERTC for a calendar quarter. This new revenue procedure may affect previously filed ERTC claims or income tax returns.

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Related Content

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  Read how, beginning after June 30, 2021, the ERTC was restructured as a refundable payroll tax credit to be taken against the employer’s share of the Medicare hospital insurance tax (1.45%) instead of the OASDI (6.2%) (as applied before July 1, 2021). Plus, the American Rescue Plan Act (ARPA) expanded the ERTC to recovery start-up businesses, defined as any employer who began carrying on a trade or business after February 15, 2020, with average annual gross receipts under $1 million. 
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  Learn that, while ARPA was enacted in 2021 Q1, the benefits of the ERTC can continue throughout 2021 and can be applied retroactively to 2020. This article also addresses questions on application of the ERTC to S Corporation shareholders and how restaurants, salons, and other businesses whose employees receive tips can calculate the credit on tip income.

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