12/30/20

Federal COVID Relief Act Expands Availability of the Employee Retention Tax Credit

Related Practices

Related Insights

Attorneys & Professionals

In early 2020, the CARES Act created a refundable payroll tax credit (the Employee Retention Tax Credit, or the “ERTC”) for eligible payroll costs of certain employers who were negatively impacted by COVID.  (See The Cares Act Impact on Employee Benefit Plans; IRS Releases FAQs with Additional Guidance on the CARES Act Employee Retention Tax Credit.)  The recent federal COVID relief act, enacted on December 27 (the “Relief Act”), makes a number of modifications to the ERTC, some of which are retroactive, but the most significant of which apply prospectively to the first two quarters of 2021.

Retroactive Changes

The following summarizes the key changes in the ERTC rules that apply retroactively: 

Changes Applicable to 2021

As originally enacted, the ERTC was potentially available only for wages paid through December 31, 2020.  The Relief Act extends the ERTC to wages paid through June 30, 2021, and expands the ability of employers to claim the credit for 2021 wages.  The following summarizes the key changes in the ERTC rules that apply to the first two calendar quarters of 2021:

For questions about this bulletin, or any other aspect of the Relief Act, contact your Vorys advisor.