N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E 4 | 2 0 2 1 30 new jersey auto retailer The employee retention credit (ERC), a refundable payroll tax credit for employers, was established by enacting the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. This article emphasizes two key qualifiers that may affect the potential eligibility of auto dealerships to qualify for this payroll tax credit in 2021. To qualify for the ERC, eligible employers must satisfy one of the following provisions: SIGNIFICANT DECLINE IN GROSS RECEIPTS For each calendar quarter in 2021, an eligible employer can qualify for the ERC if their gross receipts were less than 80% of their gross receipts for the same 2019 calendar quarter (or the same 2020 calendar quarter if the employer did not exist as of the beginning of the same 2019 calendar quarter). In addition to these eligibility requirements, an employer also can determine eligibility based on gross receipts in the immediately preceding calendar quarter compared with the corresponding quarter in 2019. This option is a quarter-by-quarter decision that allows the employer to make a different decision in 2021. For the significant decline in gross receipts, aggregation rules need to be considered. From the establishment of the ERC under the CARES Act, aggregation rules require members of a controlled group to calculate the ERC as a single employer. There are three categories of aggregated companies that fall under the special controlled group classification: 1. Parent-Subsidiary Controlled Groups: One entity owns 50% or more of all entities 2. Brother-Sister Controlled Groups: Five or fewer people own at least 80% of each entity in the group with at least 50% voting power 3. Combined Groups of Corporations: A combination of brother-sister and parentsubsidiary companies Entities within any of the above categories are subject to the aggregation rules. Therefore, all group members will be treated as a single employer when applying the ERC qualifiers of Employee Retention Credit (ERC) Guidance for Dealerships in 2021 By Scott Lewis, CPA, MSA, Rosenfield and Co.
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