Checkmate's 2021 Employee Retention Tax Credit Service

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, was designed to encourage Eligible Employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19, with an employee retention tax credit (ERTC).

In late 2020 and early 2021, legislation was passed, extending and expanding the ERTC into 2021 – initially through December 31, 2021, but then this was amended to terminate the program as of September 30, 2021.

The 2021 ERTC is a fully refundable payroll tax credit for employers equal to 70 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid during the eligibility period, with a maximum eligibility period extending from 1/1/21 through 9/30/21. The maximum amount of qualified wages taken into account with respect to each employee is $10,000 per quarter, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee in 2021 is potentially $21,000.

Who is an Eligible Employer?

Eligible Employers for the purposes of the Employee Retention Credit are those that carry on a trade or business during calendar year 2021, including a tax-exempt organization, that either:

• Fully or partially suspends operation during any calendar quarter in 2021 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
• Experiences a significant decline in gross receipts during the calendar quarter.

What is a Significant Decline in Gross Receipts?

A significant decline in gross receipts has occurred in any quarter of 2021 if  an employer’s gross receipts for that calendar quarter are less than 80 percent of its gross receipts for the same calendar quarter in 2019.

Alternatively, an employer can determine that they qualify for the 2021 ERTC if gross receipts from the prior calendar quarter were less than 80% of gross receipts from the same calendar quarter in 2019.

When Does ERTC End with Full/Partial Suspension of Operations?

For employers who are eligible for the ERTC due to a full or partial suspension of operations, the ERTC is available for qualified wages paid from the date on which operations are first affected by the suspension through the last day on which your business was affected by the full or partial suspension of operations.

What are Qualified Wages?

Qualified wages are wages and compensation (not otherwise paid for with PPP money) paid by an Eligible Employer to employees during the eligibility period. Qualified wages include the Eligible Employer’s qualified health plan expenses that are properly allocable to the wages.

The definition of qualified wages depends, in part, on the average number of full-time employees employed by the Eligible Employer during 2019.

If the Eligible Employer averaged more than 500 full-time employees in 2019, qualified wages are the wages paid to an employee for time that the employee is not providing services due to either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. 

If the Eligible Employer averaged 500 or fewer full-time employees in 2019, qualified wages are the wages paid to any employee during any period of economic hardship described above.

2021 Employee Retention Tax Credit Service

Checkmate’s Service includes:

• Accurate pay period by pay period calculation of the Employee Retention Tax Credit.
• Application of total Employee Retention Tax Credit available for each employee against the current pay period 941 tax liabilities (reducing the 941 tax liability amount to zero, in some cases).
• Tracking of the remaining Employee Retention Tax Credit that could not be realized via reducing the 941 tax liabilities (because the liability amount was reduced to zero).
• Review and monitoring of per pay period and YTD Employee Retention Tax Credit amounts, to ensure that annual per employee tax credit limits are adhered to and that tax credits are only calculated on eligible wages.
• Coordination of the processing of FFCRA tax credits in conjunction with applicable Employee Retention Tax Credits.
• Assistance with the processing of IRS form 7200, in order to receive an expedited refund from IRS when the available Employee Retention Tax Credit exceeds the current pay period 941 tax liability amount.

In order to utilize Checkmate’s Employee Retention Tax Credit Service, please complete the web form to the right.