---
title: New Law Significantly Expands the Employee Retention Credit
description: The Consolidated Appropriations Act recently signed into law made significant, retroactive changes to the Employee Retention Credit. Here’s what you need to know.
image: https://blog.mgallp.com/hubfs/employee%20retention%20credit.jpg
---
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# **New Law Significantly Expands the Employee Retention Credit**
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The recently enacted Consolidated Appropriations Act (CAA) made many changes and updates to the prior COVID-19 relief legislation. Among those, it provides greater relief to businesses by clarifying and expanding the Employee Retention Credit.
This credit, created by the CARES Act, allows eligible employers a refundable credit against employment taxes equal to 50 percent of qualified wages paid from March 13, 2020 to December 31, 2020 to employees who are not working due to the employer’s full or partial suspension of business or a significant decline in gross receipts.
Before the CAA, this credit did not benefit employers applying for PPP funds, as employers could not both apply for this credit and qualify for PPP funding. However, this new law allows employers who borrowed PPP funds to take advantage of BOTH programs. The credit was also expanded to 2021 for wages paid between January 1, 2021 – July 1, 2021 (see 2021 applicable limits/amounts below in blue).
### **4 Commonly Asked Questions Regarding the Employee Retention Credit**
**1. Who is eligible for the ERC?**
- An employer whose business was fully or partially suspended during the calendar quarter due to government shutdowns/limits on travel/group meetings, etc. due to COVID-19, **OR**
- An employer that experienced a 50% decline in gross receipts for a calendar quarter compared to the same quarter in the prior year. (2021: 20% or more reduction in gross receipts when comparing a quarter in 2021 **to that same quarter in 2019**. Please note that employers not in existence as of the beginning of the same calendar quarter in 2019 may use the same calendar quarter in 2020.)
**2. How do I calculate the credit?**
- The credit is equal to **50 percent** (70% for 2021) of Qualified Wages (see definition below) paid to employees who are not working due to the employer’s full or partial suspension of business or a significant decline in gross receipts.
- The credit is refundable, meaning employers can potentially get a refund if the credit exceeds the employer’s 6.2% of social security tax paid on those wages.
- The credit is a dollar for dollar credit against employment taxes and can reduce the amount of payroll taxes due when filing payroll tax returns.
- The credit can be claimed on a quarterly basis, but the wages, **including health benefits**, for which the credit can be claimed are limited to $10,000 in aggregate per employee for all quarters. So the maximum qualified wages are $10,000 per year, per employee for 2020 and $10,000 per quarter, per employee for 2021.
**3. What amount of wages are eligible for the ERC?**
**4. How do I claim the Employee Retention Credit?**
### **We Are Here to Make the Complex Simple**
If you have any further questions or concerns, please reach out to your team at MGA. We will continue to keep you updated with any further guidance as it is released.
[](https://cta-redirect.hubspot.com/cta/redirect/3977191/38588b8e-d394-4652-92ad-df96dc9c22e6)
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January 26, 2021
Posted in [COVID-19](https://blog.mgallp.com/tag/covid-19)
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