Employee Retention Credit (COVID-19 Tax Relief)
Due to economic disruptions, such as COVID-19, the United States Government steps in to provide temporary tax incentives to lower tax burden on companies impacted by the disruption.
The Employee Retention Credit is one of these incentives. The Consolidated Appropriations Act of 2021 increased this credit's total potential benefit and lowered the qualification threshold for companies to take it. Additionally, eligible start-up businesses, those that started after February 15, 2020, will qualify during the final two quarters of 2021 if gross receipts are below $1 million. In simple terms, the credit rewards taxpayers for retaining employees on payroll during 2020 and 2021. Due to the credit's mechanics, the credit can provide a substantial benefit. For example, a company of just ten employees could be eligible for a $70,000 refundable credit for each quarter ($280,000 total in 2021).