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HowardSimon
retirement plans · payroll solutions
human resources management
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Employee Retention Credit (ERC) AND MORE!!
Latest News
In 2021 there has been no shortage of new
legislation and guidance. We will continue to track the developments and
provide you with updates as they occur. There are many important updates in
the summary below. Please read this update in its entirety!
ERC Credits
While some new guidance has been released,
there are still many unanswered questions about the Employee Retention
Credits as well as the new legislation that recently passed. Consistent with
these changes, we have updated our procedure to claim these credits.
*** ERC
credits can be up to $33,000 PER EMPLOYEE!
Please Read this Notice in its entirety. ***
·
IRS
provides guidance for employers claiming the Employee Retention Credit for 2020,
including eligibility rules for PPP borrowers | Internal Revenue Service.
·
IRS
provides guidance for employers claiming the Employee Retention Credit for
first two quarters of 2021 | Internal Revenue Service
o
NOTE: The Relief Act allows an alternative
quarter to calculate gross receipts decline for 2021. Under
this election, an employer may generally determine if the decline in gross
receipts test is met for a calendar quarter in 2021 by comparing its gross
receipts for the immediately preceding calendar quarter with those for the
corresponding calendar quarter in 2019. Accordingly, for the first calendar
quarter of 2021, an employer may elect to use its gross receipts for the
fourth calendar quarter of 2020 compared to those for the fourth calendar
quarter of 2019 to determine if the decline in gross receipts test is met. If
using the alternative quarter to determine eligibility for the second quarter
2021, the employer can compare gross receipts from the first quarter 2021 to
the first quarter 2019.
·
There
is currently no immediate expiration on the retention credits – YOU DO NOT
NEED TO CLAIM THE 2021 CREDIT WITH YOUR FIRST QUARTER FILINGS. The credit can
be claimed later in the year by filing an amended return.
·
The
2021 ERC is now Applicable for all 4 quarters! IRS guidance is yet to be
released for the third and fourth quarter 2021.
·
2021 Eligibility Overview: New law extends COVID tax
credit for employers who keep workers on payroll | Internal Revenue Service
(irs.gov)
·
PPP2
and ERC: We do not know how the PPP2 will interact with the ERC in 2021 –
guidance is still pending. However, you will definitely
want to try and maximize your ERC credit with the usage of the PPP2
funds.
·
The
IRS has posted this warning stating their guidance is NOT applicable to 2021
on their FAQ page:
Please
see Notice
2021-20 PDF for guidance on the
Employee Retention Credit as it applies to qualified wages paid after March
12, 2020, and before January
1, 2021.
These FAQs do not reflect the changes
made by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief
Act), enacted December 27, 2020, or the American Rescue Plan Act of 2021 (ARP
Act), enacted March 11, 2021.
The Relief Act amended and extended the employee retention credit (and the
availability of certain advance payments of the tax credits) under section
2301 of the CARES Act for the first and second calendar quarters of 2021. The
ARP Act modified and extended the employee retention credit for the third and
fourth quarters of 2021.
Claiming the 2020 ERC Credit
**IF
you had a PPP loan in 2020 and have not filed for forgiveness, and are
claiming the 2020 retention credit, please be sure to maximize your ERC
credits and minimize your payroll costs!
As
mentioned above, guidance on calculating the 2020 retroactive credits
for those that also had a PPP loan
has been released. To process the 2020 credit on your behalf, we will
require:
·
Confirmation of your eligibility by completing
the 2020 ERC Authorization Form
and returning the signed form to payroll@hsimon.com
or uploading it through file exchange on the Portal.
·
As
HowardSimon has no way of knowing what wages were used for PPP
forgiveness, we will require the submission of your Qualified Wages
for each quarter using the 2020 ERC Request spreadsheet. Please return
it to payroll@hsimon.com
or upload it through file exchange on the Portal. If you need assistance
determining your qualified wages, consult with your accounting professional,
and HowardSimon consulting assistance is available as well.
Upon receipt of the completed
documentation, please allow 8-10 weeks for credit processing. HowardSimon
will prepare and file form 941-x
to claim the credit. When the amended return is processed, you will receive a
refund check directly from the IRS.
Please note: Last year, refunds took 6-8 months to be issued by the IRS.
Claiming the 2021 Credit
The IRS has stated that guidance is still
forthcoming. If you have a PPP2
Loan, we DO NOT advise claiming the 2021 credit at
this time as it is still unclear how those funds interact with the
credit. However, we do understand that business reasons may override this
concern. If you wish to claim this credit in advance of guidance being
finalized, please see the procedure below.
Prior Quarter Credit Processing for the
2021 ERC Credit:
You
may claim the credit for any completed quarter in 2021 by using the procedure
below. HowardSimon will prepare and file form 941-x to claim the
credit. When the amended return is processed, you will receive a refund check
directly from the IRS. Please note: Last year, refunds took 6-8 months to be issued by the IRS.
·
Confirm your eligibility by completing the 2021 ERC Authorization Form. This form must be executed
by an officer of the company. Please return the signed form to payroll@hsimon.com
or by uploading it through file exchange on the Portal.
Please
note: If you file form 7200 to claim this credit, please be certain to
forward a copy to us. Any advance you received from the IRS prior to filing
Form 941 has to be reported on Form 941 to avoid claiming
the credit twice.
·
As
HowardSimon has no way of knowing what wages were covered by your PPP
loan, you must submit your Qualified Wages for each quarter using the 2021 ERC Request spreadsheet. Please return
it to payroll@hsimon.com
or upload it through file exchange on the Portal. If you need assistance
determining your qualified wages, consult with your accounting professional,
and HowardSimon consulting assistance is available as well.
2021 Current Payroll Processing:
If you would like to claim the credit
concurrent with your payroll processing, please contact payroll@hsimon.com. We can process the credit and reduce your
tax deposits with each payroll via Automated ERC Processing: HowardSimon
will add a RegRC code to your payroll. The system
will automatically move gross wages (Up to $10,000/quarter) from Reg to RegRC. All wages in the RegRC
will be considered qualified wages and the credit will be calculated on those
wages. The credit will reduce the amount of your federal tax deposit.
RegRC – Regular
Wages will show on the employee’s paycheck. Sample:
Reg – Regular
Wages: $1,000
Reg- Regular Wages:
-$1,000
RegRC- Regular
Wages: $1,000
HowardSimon automated all of the other
credits for us, why can’t you automate this?
We
actually did automate the calculations for the
original retention credit! Clients that did not have PPP loans were able to
take advantage of this automation and take the 2020 ERC credit concurrent with
their payroll processing and the method described above for 2021. However,
the recent legislation allowing the retroactive credit for companies which
took PPP loans added another layer of calculations with components that are
beyond the scope of the payroll data HowardSimon maintains. While we
will certainly assist in the process, we unfortunately will not be able to
automate the calculations as we have been able to with other credits.
Utilizing Outside Services for Credit
Processing
Many of our clients have been contacted by
firms specializing in retention credits. Anyone can file a 941x on your
behalf – you are not required to utilize HowardSimon for this service.
If you choose to engage your accounting firm, file it yourself, or engage a
firm that specializes in retention credits, just be sure to provide us with a
copy of any tax forms that are filed on your behalf so we can keep your
records accurate.
PPP1 Forgiveness Application Deadline
PPP -- Loan Forgiveness FAQs (October 13,
2020).pdf (sba.gov)
4. Question: The PPP loan
forgiveness application forms (3508, 3508EZ, and 3508S) display an expiration
date of 10/31/2020 in the upper-right corner. Is October 31, 2020 the
deadline for borrowers to apply for forgiveness?
Answer: No. Borrowers may submit a
loan forgiveness application any time before the maturity date of the loan,
which is either two or five years from loan origination. However, if a
borrower does not apply for loan forgiveness within 10 months after the last
day of the borrower’s loan forgiveness covered period, loan payments are no
longer deferred and the borrower must begin making
payments on the loan. For example, a borrower whose covered period ends on
October 30, 2020 has until August 30, 2021 to apply for forgiveness before
loan repayment begins. The expiration date in the upper-right corner of the
posted PPP loan forgiveness application forms is displayed for purposes of
SBA’s compliance with the Paperwork Reduction Act, and
reflects the temporary expiration date for approved use of the form. This
date will be extended, and when approved, the same form with the new
expiration date will be posted.
PPP2 Forgiveness Estimator
We have received a ton of positive feedback
about the Forgiveness Estimator. We are thrilled to know so many of you found
it to be useful! We have been receiving a number of
inquiries asking if and when the Forgiveness estimator will be updated for
PPP2. We do plan on updating the estimator as soon as final guidance is
released and the SBA releases their forgiveness application.
American Rescue Plan Act of 2021 (ARP Act)
President Biden signed the American
Rescue Plan Act of 2021 (ARPA) into law on March 11, 2021. This was a
massive bill that contains over $1.9 trillion in Federal Stimulus. It will
take some time before guidance is issued on all of
the provisions.
Utilizing Codes in Advance of Guidance
The payroll system will be updated with
new codes when guidance has been released. In the interim if you have
qualified wages to pay:
·
Pay with one of the reimbursable codes currently in the
system. You may be required to move this compensation to a new code when they
become available and guidance is finalized.
·
Recommended: Pay the employee with a non-reimbursable code (just
regular sick pay, holiday, etc). Move this pay to a
reimbursable code once final guidance is released.
Emergency Paid Sick Leave Act (EPSLA)
·
The tax credit an employer can receive for paid
sick leave is based on an employee's regular rate of pay, up to a cap of $511
a day, if the leave is needed for one of the new reasons related to
immunization or testing or because of the employee's own symptoms, quarantine or isolation. If the paid sick leave is for any
other reason, the amount of tax credit an employer can receive is limited to
2/3 the employee's regular rate of pay and capped at $200 a day.
·
EPSLA provides a new annual allotment of up to
80 hours (10 days) per employee of qualifying paid sick leave available for
Q2 and Q3 2021 tax credits, Again, this does not obligate an employer to
provide additional leave but allows employers to offer a new bucket of leave
to employees if they so choose.
·
EPSLA
adds additional qualifying reasons to take leave (for purposes of qualifying
for the tax credits):
o
The
employee is seeking or awaiting the results of a diagnostic test for or a
medical diagnosis of COVID-19 after an exposure or at the employer's request;
o
The
employee is obtaining a COVID-19 vaccine; or
o
The
employee is recovering from any injury, disability, illness
or condition related to a COVID-19 vaccine.
·
The
credits are expanded to allow 501(c)(1) governmental organizations to take
them.
Emergency Family and Medical Leave Expansion Act (EFMLEA)
·
Increases
the aggregate cap for tax credits from $10,000 to $12,000 per employee.
·
Expands
the reasons to take leave to include the qualifying reasons to take paid sick
leave, including the additional reasons set forth above.
·
Eliminates
the requirement that the first 10 days of expanded family and medical leave is unpaid.
·
The
available tax credit per employee is still limited to 2/3 the employee's
regular rate of pay up to a maximum of $200 per day for all reasons for
leave, including the new leave reasons related to immunization or testing and
reasons that qualify for a $511 per day cap when the wages are paid under the
paid sick leave provisions.
·
The
credits are expanded to allow 501(c)(1) governmental organizations to take
them.
Extension of PPP Loans and Other Benefits for Small
Businesses
ARPA adds $7.25 billion to the Paycheck
Protection Program (PPP) and expands eligibility. The current deadline to
apply for PPP loans is March 31, 2021. However, the House of Representatives
has passed a bill to extend the deadline to May 31, 2021. The bill is
expected to pass in the Senate and be signed into law soon.
HowardSimon Fees
HowardSimon continues to make all
compliance tools in the system for PPP processing, our PPP calculator, FFCRA
processing, consulting, etc. free of charge. While our system tools will
continue to be available to our clients, ERC assistance and claiming the
credit (both retroactively and concurrently) requires significant manual
work. To help offset these costs, we are implementing the following
charges for retroactive credit processing, corrective measures, loan
application consulting, and other advisory and consulting services:
ERC Processing Fees:
·
$225
Processing and Review fee. The fee is to configure the system, review your
documentation and also includes a 1-hour
consultation - PLEASE SCHEDULE A CONSULATION IN ASDVANCE. These credits are extensive and a mistake can be costly.
·
Retention
Credit Form 941-x: $250/per form
·
Adjustment
Payroll for Credit Processing: $150 + $3.25/employee
Additional Consulting Fee of $225/hour (1
hour minimum)
·
General
Consulting Services
·
PPP1
or PPP2 Loan Application Assistance
·
ERC
Consulting Services
·
Forgiveness
Consulting Services
Second Draw PPP Loans
The deadline for applying was 3/31/2021,
but this will likely be extended. A borrower is generally eligible for a
Second Draw PPP Loan if the borrower:
·
Previously
received a First Draw PPP Loan and will or has used the full amount only for
authorized uses;
·
Has
no more than 300 employees; and
·
Can demonstrate at least a 25% reduction in
gross receipts between comparable quarters in 2019 and 2020. Second Draw PPP Loans (sba.gov)
If you are using 2019 wages, you can use
the same calculations and worksheets that you used for your first
application. If you are using 2020 wages, you can run the same reports for
2020 that you ran for 2019. You can also utilize the Ad-Hoc payroll costs report
located at the bottom of the PPP Loan Forgiveness Resource Center in the portal.
Thank You!
As always, thank you for your business, and
please do not hesitate to contact us with any questions or concerns.
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