The Federal and Maine governments have provided for certain tax credits to support businesses during the COVID-19 pandemic. Read below for more details.
Employee Retention Tax Credit
The Employee Retention Tax Credit (ERTC) is a fully refundable tax credit against certain employment taxes. The ERTC was originally part of the CARES Act and was extended on 12.27.20 by the Taxpayer Certainty and Disaster Tax Relief Act.
YOU SHOULD READ THIS IF YOU HAVE W2 EMPLOYEES (FT or PT).
For the period from March 12th, 2020 to December 31st, 2020 small businesses that meet the following criteria can apply retroactively (yes, you can apply now for 2020) for this credit.
- You experienced a full or partial suspension of your business from 3.12.20 to 12.31.20 because of Municipal, State, or Federal orders limiting commerce, travel, or group meetings due to COVID-19. (In Maine we started to see State restrictions on March 22nd due to Governor’s orders). Read more about what counts here. OR
- You experienced a decline of 50% or more in gross receipts from the same quarter in 2019.
From when the eligibility starts (as early as March 12th, or when you experienced the 50% decline in gross sales/revenue quarter on quarter, you are eligible until the first quarter when gross receipts/sales are more than 80% of what they were in the same quarter 2019.
The ERTC for 2020 allows you to apply for a reimbursement of up to 50% of $10,000 wages and qualified healthcare costs, up to $5,000 credit per employee.
For the period from January 1st, 2021 to June 30th, 2021 small businesses that meet the following criteria can apply for this credit.
- You experience a full or partial suspension of your business from 1.1.21 to 6.30.21 because of Municipal, State, or Federal orders limiting commerce, travel, or group meetings due to COVID-19. OR
- You experience a decline of 20% or more in gross receipts from the same quarter in 2019.
This time eligibility resets each quarter.
The ERTC for 2021 allows you to apply for a reimbursement of up to 70% of wages and qualified healthcare costs, up to $7,000 credit per employee per quarter, or $14,000 total per employee.
It USED TO BE that you could not apply for an ERTC and the Paycheck Protection Program. THIS IS NO LONGER THE CASE.
Even if you received a PPP, you can still apply to receive an ERTC.
However, as with all CARES Act funds, you can’t “double dip” or cover the same expense, at the same time, with multiple sources of CARES Act funds. You cannot claim an ERTC for wages that have been paid with the proceeds of a PPP loan.
- I am a sole proprietor with no employees, can I apply for this?
- I am a single member LLC taxed as an s-corp, and I pay myself through payroll. Do I count as an employee for the ERTC? Or…. I am a self-employed individual. Am I eligible?
- No. See FAQ #23.
- How do I apply for the ERTC?
- Talk to your accountant and/or your payroll company if you have one.
- Read this IRS site for more info on applying. At this point, you’ll file as part of your quarterly 941 form.
Earn up to $5,000 in tax credits per employee on your payroll – or get a refund at the end of the quarter.
Businesses who have experienced a significant decline in gross receipts in 2020 and are paying workers may be eligible for a tax credit for up to $5,000 per employee – payable immediately at the end of each quarter in 2020.
Watch our brief summary above for more information and then talk to your accountant or bookkeeper to file for the employee retention tax credit using IRS Form 941.
- Employee Retention Tax Credit (CEI Powerpoint)