Important ERTC Considerations Prior to Filing 2020 Tax Returns

The Internal Revenue Service (IRS) released Notice 2021-20 incorporating detailed guidance for employers claiming the Employee Retention Tax Credit (ERTC) for any quarters in 2020. Additionally, this guidance includes examples of various scenarios in determining eligible wages where a taxpayer may have already filed for PPP forgiveness.


Potential Benefits of the ERTC


At a high-level, the maximum benefit a business could receive from the ERTC within 2020 is:


Number of employees x $5,000


For 2021, that maximum potentially increases to:


Number of employees x $14,000


We have evaluated many of our clients’ situations under both the 50% reduction in gross revenue, as well as, the full or partial shutdown of operations. Here are a few of those results:


Client 1: Privately-held business with 65 employees, mostly part-time, filing under the 50% decline in gross receipts method. Their 2020 ERTC amounted to over $125,000, on top of expected full forgiveness of their $100,000+ PPP loan.


Client 2: Hospitality business with over 500 employees, mostly part-time, filing under the full or partial shutdown operations method. Their 2020 ERTC amounted to $1M, on top of expected full forgiveness of their $2M PPP loan.


Client 3: Doctor’s office with 30 employees, filing under the full or partial shutdown of operations method, covering only 8 weeks early in the pandemic. Their 2020 ERTC amounted to nearly $20,000, on top of expected full forgiveness of their $200,000+ PPP loan.


Client 4: Contractor with 20 employees, mostly full-time employees, filing under the 50% decline in gross receipts method. Their 2020 ERTC amounted to $100,000, on top of full forgiveness on their already SBA-forgiven PPP loan of $200,000+.


Impact to 2020 Tax Returns