Focus on Taxation:
Employee Retention Credit
The recently enacted Consolidated Appropriations Act, 2021 (CAA) has given new life to the Employee Retention Credit (ERC) initially made available by the Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act. The ERC is a refundable payroll tax credit designed to help employers adversely affected by the coronavirus pandemic who maintain employee payroll during qualifying periods in 2020 and 2021.
Many employers did not previously utilize the ERC due to the fact it was unable to be taken in conjunction with a Paycheck Protection Program (PPP) loan. But the CAA has retroactively removed the mutual exclusivity between the two incentives, making the ERC newly available for 2020 periods to millions of small businesses. In addition, the CAA extended the ERC into the first two quarters of 2021 and brought other favorable changes for those periods as well.