For 2021, you can receive the credit in advance, and then reconcile it on the quarterly 941 report. This works just like Obamacare premiums are reconciled on the personal tax returns each year.
The IRS has updated their guidance on this. Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either:
- the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- a significant decline in gross receipts (20% reduction in gross revenue).
Based on our research, practically ALL businesses who paid wages do qualify under the first provision listed above. The certainly applies to Florida businesses in 2020, and those in Leon and Gadsden counties in 2021. This applies to all wages paid, whether or not your employees actually worked. This means that you can get a payroll tax credit of up to $5,000 per employee paid during 2020. This applies to essential and non-essential businesses.
You must have 100 or fewer full-time employees. Qualified wages are generally all wages, including certain health care costs, (up to $10,000 per employee) paid to employees.
Beginning 2021, the ERTC rules change as follows:
- Applies to Q1 and Q2 only.
- The maximum credit is 70% of wages up to $10K per employee per quarter. This comes to $7K maximum per employee per quarter.
- Increases the limit from 100 employees to 500 employees.
- Allows new employers who were not in existence for all or part of 2019.
*Full or partial suspension of business provision applies to 2020 and 2021.
*We have a flowchart for 2021 ERTC that can be provided upon request.