The Employee Benefits & Executive Compensation attorneys at Chamberlain Hrdlicka represent public companies, large and closely-held private companies, tax-exempt organizations, and the fiduciaries who oversee those entities' employee benefit plans. We understand incentives in the workplace, and we stand ready with an integrated approach to help you deal with them.
From qualified retirement plans, to executive compensation, to fiduciary advice, to health and welfare programs, to mergers and acquisitions, to ERISA litigation, our broad experience helps companies answer questions in these areas of the law. A background in tax, securities, and fiduciary matters is our foundation. A common theme runs through our work in these areas: we specialize in representing employers in protecting their interests and maximizing tax advantages. We understand the work that goes into creating and maintaining incentives in the workplace, and we have the technical skills to help keep a company's employee benefit plans operating at peak efficiency.
At Chamberlain Hrdlicka, we stand with company Boards of Directors, Compensation Committees, and the HR teams that serve those directors and committees, as they seek to provide a stable, productive environment for company executives and workers.
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Enacted Dec. 27, 2020, The Taxpayer Certainty and Disaster Tax Relief Act of 2020 made a number of amendments to the Employee Retention Tax Credits (“ERTC”) previously available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Changes include extending the ERTC for six months through June 30, 2021. Some of the changes apply only to calendar year 2021, while others apply to both 2020 and 2021 calendar years.
Due to the new legislation, eligible employers can claim a refundable tax credit against their share of Social Security taxes 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. Therefore, the maximum ERTC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.
Employers can access the ERTC for the first two quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. Small employers, employers with an average of 500 or fewer full-time employees in 2019, may request advance payment of the credit (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits. In 2021, employer (with an average of over 500 full-time employees) advances are not available.
Beginning Jan. 1, 2021, employers are eligible if they operate a trade or business, and experience either: A complete or partial suspension of the operation of their trade or business during 1/1/2021 to 6/30/2021 because of governmental orders limiting commerce, travel or group meetings due to COVID-19, or A decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019 (For 2020 to be eligible based on a decline in gross receipts, the gross receipts were required to be less than 50%). If an employer did not exist in 2019, they can use the corresponding quarter in 2020 to measure the decline in their gross receipts. Additionally, for the first two calendar quarters of 2021, employers may elect (in a manner yet to be provided by the IRS, but in future IRS guidance) to measure the decline in their gross receipts using the immediately preceding calendar quarter, the fourth calendar quarter of 2020 and first calendar quarter of 2021, respectively, compared to the same calendar quarter in 2019.
Finally, effective 1/1/2021, the definition of qualified wages was changed to the following:
- For an employer in 2019 that averaged more than 500 full-time employees, qualified wages are generally those wages paid to employees that are not providing services because operations were fully or partially suspended or due to the decline in gross receipts.
- For an employer in 2019 that averaged 500 or fewer full-time employees, qualified wages are generally those wages paid to all employees during a period that operations were fully or partially suspended or during the quarter that the employer had a decline in gross receipts regardless of whether the employees are providing services.
Retroactive to the Mar. 27, 2020, enactment of the CARES Act, the law now allows employers who received Paycheck Protection Program (PPP) loans to claim the ERTC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.
Joshua Sutin helps clients unravel complex legal and business issues related to employee benefit plans, tax-exempt organizations, and business tax planning. He counsels both businesses and not-for-profit organizations on the ...