JULY 2021

GUEST column
The COVID Relief for Employers
that You May Not Know About
By now, just about
everyone has heard
of PPP loans, EIDL
Loans, and the various
grants available to employers
that have been negatively
impacted by COVID-19.
However, there is another
COVID relief program that
many people don’t know
about called the Employee
Retention Tax Credit
(ERC). It’s largely unknown
because when it was first rolled out it
didn’t apply to a lot of people (you
couldn’t claim the credit if you got a
PPP loan), but the rules have since
changed. Under the new ERC rules,
many businesses that were impacted
by COVID are entitled to tens, or
even hundreds of thousands of dollars
in COVID relief funds – over
and above any PPP or EIDL loans
they might have already received.
VENAR AYAR
SPECIAL TO THE
CHALDEAN NEWS
Who qualifies for the
credit?
Any employer that meets
any one of the following
three conditions is a potential
candidate for the ERC:
The business was fully
or partially suspended due
to a government order, and
it had more than a nominal
impact on the business.
The business experienced
a significant decline
in gross receipts for any one quarter
in 2020 or 2021, compared with the
same quarter in 2019. The definition
of “significant decline” varies
depending on whether the quarter
pandemic (that’s a partial suspension).
Since the restaurants meet the
first test, it wouldn’t even matter if
they made twice as much money during
COVID as ever before – they still
qualify for the credit.
How is the amount of the credit
calculated?
The amount of the credit is calculated
based on a certain percentage
of qualified wages the business paid.
The exact percentage depends on
the year in which the quarter you are
claiming the ERC for falls in. For
quarters in the calendar year 2020,
the credit would be 50% of the qualified.
For quarters in the 2021 calen-
you can claim per employee is $5,000
for 2020 (50% of $10,000), and
$28,000 for 2021 (70% of $40,000).
So, what’s the catch?
The only catch is that you cannot
claim the ERC for wages that were
paid using money the business got
from the PPP program. So, this is
where it starts to get complicated:
to do it right (and get the maximum
amount possible), you would have to
analyze all the payroll records for the
relevant quarters’ week-by-week and
employee-by-employee and allocate
the wages between the PPP program
and the ERC program. The goal is
to try and make sure you are getting
100% of your PPP loan forgiven,
while also getting the biggest ERC
credit possible. Because the definition
of “qualified wages” is different
depending on if you are talking about
“The ERC is what’s known as a refundable tax credit that is available
to employers and applied against your payroll (not income) taxes.
The maximum amount you can get is $33,000 per employee.”
So how does it work?
The ERC is what’s known as a refundable
tax credit that is available
to employers and applied against
your payroll (not income) taxes.
The maximum amount you can get
is $33,000 per employee. What we
mean when we say the credit is refundable
is that the IRS will cut you
a check for the full amount of the
tax credit - even if the amount of the
credit is more than the payroll taxes
you paid. It’s very similar to a grant
in this way. A non-refundable credit
would wipe your tax bill out and carry
forward, but refundable means you
still get money back.
you are looking at is in 2020 or 2021.
To qualify for 2020, your sales would
have had to go down by more than
50%. For 2021, they would have had
to go down by more than 20% (compared
to the same quarter in 2019).
The business was started after
February 1, 2020, and it has annual
revenue of less than $1 million.
Remember – the business only has
to qualify for any one of the three tests
to qualify for the credit. For example,
just about every sit-down restaurant
would qualify for the credit under the
first test due to the fact that their indoor
dining capacity was limited by
a government order throughout the
dar year, the amount of the credit is
70% of the qualified wages.
For most employers, qualified
wages include wages paid to employees
other than the owners of
the business and their relatives – up
to a certain maximum amount per
employee. The maximum amount
of qualified wages you can claim per
employee depends on – you guessed it
– which year we are dealing with. For
2020 credits, the maximum qualified
wages are $10,000 per employee (total
for the year). For 2021, the maximum
qualified wages are $10,000 per
employee, per quarter ($40,000 for
the year). So, the maximum credit
PPP forgiveness or ERC claims, doing
the allocations could get pretty
involved.
This is a huge opportunity for
businesses to take the negative impact
of the pandemic and turn it into
a positive. If anyone has any specific
questions about how this works, you
are welcome to call my office at 248-
691-5555, and I would be happy to
spend some time answering your
questions free of charge.
Venar Ayar is the Principal Attorney
at Ayar Law, a Farmington Hills based
law firm specializing in Tax Law for
individuals and businesses.
New York Life Congratulates
Gabriel H. Sinawi CLU®, ChFC® for
more than 40 Years of Service
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JULY 2021 CHALDEAN NEWS 7