Today President Biden signed the American Rescue Plan Act of 2021 stimulus bill into law. Among the many provisions within the legislation includes another six-month extension of the CARES Act Employee Retention Credit (ERC).

The legislation expands the ERC, a refundable payroll tax credit, to include wages for eligible employers from July 1, 2021 to December 31, 2021. In December 2020, the second relief stimulus extended the ERC to June 30, 2021 and expanded the credit to $7,000 per employee per quarter in 2021, among other provisions.

This extension now means eligible employers can receive up to $14,000 in additional credits per employee, or up to $26,000 in refundable tax credits per employee. Here is the breakdown:

• Up to $5,000 per employee per year in 2020 (50% of wages up to $10,000)
• Up to $7,000 per employee per quarter in 2021 (70% of wages up to $10,000)

In addition, the American Rescue Plan Act of 2021 includes two new categories and incentives for the third and fourth quarters of 2021:

• Recovery Startup Business – Employers that began their business after February 15, 2020 and have annual gross receipts not exceeding $1 million. The credit for these employers is capped at $50,000 per quarter. Recovery startup businesses do not need to meet the government orders or gross receipts test to qualify.
• Severely Financially Distressed Employers – Employers whose gross receipts for the quarter are less than 10 percent of their gross receipts for the equivalent quarter in 2019. An employer in this category with more than 500 employees can credit all wages paid and does not need to meet the “not providing services” requirement.

Jorns & Associates is prepared to assist you in determining eligibility, calculating, and monetizing the ERC. Our experienced team has developed a proprietary methodology, proven to be efficient and maximize your credits.