QUALIFICATIONS:

(Note we are not talking about 2020 gross receiptsbut are talking about comparing 2021 gross receipts to 2019): 

There are also certain rules regarding Government Shutdown orders that might have affected your operations, and you might qualify under these government shutdown order rules as well; however, these rules are complex as for example, an Essential business is typically not allowed a credit under the government shutdown rules, unless they can prove that their suppliers or other matters got affected.  The purpose of this article is not to deal with government shutdown rules but to talk about the decline in gross receipts method of qualification. 

YOUR BUSINESS WAS FULLY OR PARTIALLY SUSPENDED (ADVERSELY AFFECTED) BY GOVERNMENT ORDERS LIMITING COMMERCE, TRAVEL OR GROUP MEETINGS DUE TO COVID-19

Gross receipts for 1^st  quarter of 2021 (January to March) has declined by more than 20% of your gross receipts in 1st quarter 2019 (Note this is not comparing 2021 to 2019 gross receipts but 2021 to 2019).  OR

Gross receipts for 2nd  quarter of 2021 (April to June)  has declined by more than 20% of your gross receipts  in 2^nd quarter 2019 (Note this is not comparing 2021 to 2020 gross receipts but is comparing 2021 to 2019).   OR

Same for 3^rd and 4^th quarters of 2021 over the same quarters in 2019.  OR

Alternatively, to claim the credit for 1^st quarter of 2021,  you can compare 4^th quarter of 2020 gross receipts with 4^th quarter of 2019 gross receipts .

PPP LOAN  EXCLUSION:   The amount of funds received as a PPP loan is during 2021 must be deducted from the allowable wages before calculating the ERC allowed wages. 

OWNERSHIP / CONSTRUCTIVE ATTRIBUTION RULES EXCLUSION:  The rules on this are quite complicated, but in summary:

If you are a more than 50% Shareholder of your corporation or entity, then your own wages don’t qualify, but regular employees wages may depending on satisfaction of above items.

If a related party is an employee, their wages don’t qualify: Related parties include Child or descendant of a child, brother, sister, stepbrother, or stepsister. The father or mother, or an ancestor of either.  A stepfather or stepmother.  A niece or nephew.  An aunt or uncle.  A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

If you own less than 50% of shares of a corporation or entity, your own wages  still might not qualify if you have living relatives listed in above. See below example:

Example 4: Corporation D is owned 34 percent by Individual L, 33 percent by Individual M, and 33 percent by Individual N. Individual L, Individual M, and Individual N are siblings. Corporation D is an eligible employee with respect to the first calendar quarter of 2021. Individual L, Individual M, and Individual N are employees of Corporation D. Pursuant to the attribution rules of section 267(c) of the Code, Individual L, Individual M, and Individual N are treated as 100 percent owners. Individual L, Individual M, and Individual N have the relationship to each other described in section 152(d)(2)(B) of the Code. Accordingly, Corporation D may not treat as qualified wages any wages paid to Individual L, Individual M, or Individual N.

WORK OPPORTUNITY TAX CREDIT NOT ALLOWED:

The wages of an employee used for Work Opportunity Tax Credit cannot be included for The Employee Retention Credit (ERC)

CREDIT / REFUND AVAILABLE:   Eligible employees can now claim a refundable tax credit against the employee share of Social Security tax (or the employee’s share of Medicare tax for the third and fourth quarters of 2021) equal to 70% of the qualified wages they pay to employees from January 1 2021  through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is up to $7,000 per employee per calendar quarter in 2021.