On Sunday, Dec. 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (CAA 2021), which contains provisions extending and modifying payroll-related COVID relief measures.
Below is a summary of the changes introduced by the CAA:
Employee Retention Credit (ERC)
ERC, PPP, & Claiming Credits
CAA 2021 allows employers to both receive the ERC and participate in the Paycheck Protection Program (PPP), though employers cannot receive the ERC and PPP loan forgiveness for the same wages.
Previously, employers were generally prohibited from receiving the ERC if they had received a PPP loan. This change applies retrospectively and prospectively.
If an employer paid wages in 2020 that qualify for the ERC and the employer did not receive the ERC, for example, because the employer received a PPP loan, such an employer may, for the purposes of claiming the ERC, treat those qualified wages as having been paid in the fourth quarter of 2020.
Extension & Modification
CAA 2021 extends the ERC program through the second quarter of 2021. Beginning on Friday, Jan. 1, 2021, the following modifications apply to the program:
- The ERC is equal to 70% of qualified wages.
- Note: The applicable percentage through the end of 2020 is 50%.
- The per employee qualified wage limit is $10,000 per quarter.
- Note: The per employee qualified wage limit in effect through the end of 2020 is $10,000 in total.
- Eligibility is expanded to include more employers, employees, and wages.
In sum, a maximum of $10,000 in qualified wages for each employee may be counted in determining the ERC in each of the first two quarters of 2021. With the ERC equaling 70% of these 2021 qualified wages, the maximum ERC per employee in each of these quarters is $7,000.
Emergency Paid Sick Leave (EPSL) & Expanded Family & Medical Leave (EFML) Credit Extension
CAA 2021 does not extend the federal requirement to provide EPSL or EFML beyond Thursday, Dec. 31, 2020. However, CAA 2021 does provide that if an employer pays wages in the first quarter of 2021 that would have been required to be paid while the federal EPSL and EFML requirements were effective, that employer can receive employment tax credits for those qualified wages and related health plan expenses.
Extension of the Repayment Period for Deferred Employee Social Security Tax
For deferred payments of the employee portion of Social Security tax made in accordance with Notice 2020-65, CAA 2021 extends the end date of the repayment period, which begins on Friday, Jan. 1, 2021, from Apr. 30, 2021 to Dec. 31, 2021. Employers are required to ratably withhold and pay or make other arrangements for the collection and payment of these deferred tax payment amounts by the end of the repayment period.
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Disclaimer: Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding the specific application of the information to your own plan.