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Here’s how to claim the Employee Retention Credit for first two quarters of 2021

Posted on June 28, 2021

The Employee Retention Credit is a part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The IRS has made changes to the Employee Retention Credit for the first two calendar quarters of 2021, including:

  • an increase in the maximum credit amount
  • expansion of the category of employers that may be eligible to claim the credit
  • modifications to the gross receipts test
  • revisions to the definition of qualified wages, and
  • new restrictions on the ability of eligible employers to request an advance payment of the credit.

Because of the new update, eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after Dec. 31, 2020, through June 30, 2021.

Qualified wages are limited to $10,000 per employee, per calendar quarter in 2021. That means the maximum employee retention credit available is $7,000 per employee. per calendar quarter, for a total of $14,000 for the first two calendar quarters of 2021.

The fine print:

  • Employers can access the Employee Retention Credit for the 1st and 2nd calendar quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits.
  • Small employers (those with an average of 500 or fewer full-time employees in 2019) may request advance payment of the credit (subject to certain limits) onForm 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits.
  • In 2021, advances are not available for employers larger than 500 full-time employees. Further details on how to calculate and claim the employee retention credit for the first two calendar quarters of 2021 can be found in IRS Notice 2021-23.

As a small-to-medium-sized business CPA firm, Teipen CPA Group can help your business apply and receive the Employee Retention Credit now available to eligible employers for wages paid during the third and fourth quarters of 2021. If you have questions or concerns about your business, we can help you find answers.