Credit for this article to Apex Advisors

There are two thresholds allowed for determining eligibility.  The first threshold requires looking at gross receipts for each quarter of 2019 and comparing against the same quarter in 2020 or 2021.  The second threshold provides for credit eligibility if, during the respective quarters of 2020 or 2021, there was a full or partial suspension of operations due to a government order.  If a company qualifies for the first and second threshold requirements, the company will not receive double benefits, but shall only be permitted to receive the same amount of benefit permitted if only one threshold had been met.

Once either of the two above thresholds is met, a company may be eligible for the following benefits against payroll taxes, with unused portions being refundable:

• 2020: If a company has a 50% decline in gross receipts, compared to the same quarter of 2019, that company may be entitled to $5,000 per eligible employee.  The second method provides, if a company experienced a suspension of operations, it may be entitled to $5,000 for each eligible employee paid during the suspension in 2020.
• 2021: If a company has a 20% decline in gross receipts, compared to the same quarter of 2019, that company may be entitled to $7,000 per quarter for each eligible employee.  The second method provides, if a company experienced a suspension of operations, it may be entitled to up to $7,000 for each eligible employee paid during a suspension of operations in each quarter of 2021.

Like many parts of the tax code, there are different aspects of the Employee Retention Credit that make it difficult for most taxpayers to calculate.  Although the PPP and Employee Retention Credit can be combined, there are limitations when the two programs are combined.  Specifically, expenses used for Payroll Protection Program forgiveness cannot be included in the calculation of the Employee Retention Credit.  Additionally, the wage expenses included in a Research and Development Tax Credit must also be removed from a calculation.  Since there are significant amounts of data sets that go into the calculation, the analysis can be daunting to anyone who does not customarily perform these types of analyses.