It was originally designed to help employers who were not eligible for a Paycheck Protection Program loan, but it was later amended so employers who received Paycheck Protection Program loan forgiveness were often still eligible for the Employee Retention Credit.
Although it ended on December 31, 2021, eligible employers may still be able to claim the tax credit by filing amended forms with the Internal Revenue Service.
[3] The American Rescue Plan Act of 2021, signed into law by President Joseph Biden, expanded the tax credit to additional employers.
Alternatively, the limitation must affect a portion of the employer's operations that constituted at least 10% of the working hours performed by its employees in 2019.
[18] An employer is not allowed to take the Employee Retention Credit on any wages or health plan expenses that the employer counted for its Paycheck Protection Program (PPP) loan forgiveness, Emergency Paid Sick Leave, or Emergency Paid Family Leave.
[19] The Employee Retention Credit is equal to 70 percent of qualified wages paid between January 1, 2021, and September 30, 2021.
If the employer is a recovery startup business, then it is based on qualified wages paid between January 1, 2021, and December 31, 2021.
Just like 2020, qualified wages also include qualified health plan expenses, but exclude wages used for its Paycheck Protection Program (PPP) loan forgiveness and payments of Emergency Paid Sick Leave and Emergency Paid Family Leave.
[22] It is common for an employer to wait eight months for the Internal Revenue Service to process its Form 941-X.
[23] An employer's tax deduction for qualifying wages must be reduced by the amount of the Employee Retention Credit.
[26] An employer is responsible for the information on its amended tax forms, even if a separate company helped file them.
[26] In February 2023, two individuals and their accounting firm were indicted on federal charges for allegedly preparing and sending over 1,000 tax forms to the IRS that claimed millions of dollars of false and fraudulent Employee Retention Credit tax credits for their clients.
[28] Both the tax preparer and the client are legally responsible for the amount of the Employee Retention Credit claimed.
[29] The Internal Revenue Service had received several hundred-thousand claims for the credit over the previous 90 days.
[30] On September 14, 2023, the Internal Revenue Service temporarily stopped processing forms for new claims for the Employee Retention Credit.
[36] On August 8, 2024, the IRS announced that it would begin processing claims submitted between September 14 2023, and January 30, 2024.