Risk & Compliance

CFOs that don’t have documentation for the credit should begin working with their legal and accounting teams to ensure compliance.

The CARES Act of March 2020, Relief Act of 2021, and American Rescue Plan Act of 2021 provided trillions of dollars in government-backed financial incentives to U.S. companies to help them weather the COVID-19 pandemic. These financial incentives proved extremely valuable at a time when uncertainty about the future of the economy was at its highest.

Estimates by U.S. Treasury Department economists indicate that as many as 19 million jobs were saved by these funding packages. Now that the dust has settled from the pandemic, CFOs may still have a challenge with one incentive still available — the Employee Retention Credit.

What is the Employee Retention Credit?

The Employee Retention Credit was created by the CARES Act and provided a refundable employment tax credit to help businesses with the cost of keeping staff employed. Originally, businesses could receive a maximum credit of $5,000 per employee in 2020. That was revised with the Relief Act of 2021 when it increased the maximum per-employee credit to $7,000 per employee per quarter in 2021. The American Rescue Plan Act of 2021 made additional changes by adding an additional incentive for “recovery startup businesses” eligible to claim a $50,000 credit per calendar quarter.

Challenges Related to Employee Retention Credits

The potential tax savings for U.S. companies was...

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