The American Rescue Plan Act of 2021 modifies the employee retention credit first created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act then extended and expanded under the Consolidated Appropriations Act, 2021. This popular employment tax credit was designed to encourage businesses to keep workers on their payroll and support small businesses and nonprofits through the Coronavirus economic emergency.
Eligible employers may claim the credit against employment taxes equal to a percentage of qualified wages paid to employees beginning in 2020. The American Rescue Plan Act of 2021 modifies the rules for the employee retention credit for calendar quarters beginning after June 30, 2021.
An employer is eligible for the employee retention credit if 1) their business was fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority, or 2) they experienced decline in gross receipts for the calendar quarter compared to the same quarter in 2019. The American Rescue Plan Act of 2021 adds a third option for eligibility, a recovery start-up business. A “recovery start-up business” means any employer that started their business after February 15, 2020, with average annual gross receipts of $1,000,000 or less, and is otherwise not an eligible employer described in items 1 or 2 above.
Please contact us to discuss your company’s eligibility for the employee retention credits under the American Rescue Plan Act of 2021.