ERC for Realty Agencies
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was eventually signed into law, provided a variety of financial benefits to many realty agencies early in 2020 amid the COVID-19 pandemic.
Payroll Tax Provisions
The COVID-19 employment tax credits as well as additional CARES Act relief provisions including paid leave credits, employee retention credits, and the deferral of social security taxes are all included in a revised Form 941. In addition to describing the changes to the form, the new Form 941’s instructions give an explanation of other COVID-19-related credits, including the Employee Retention Credit.
Real estate agencies that did not get a Paycheck Protection Program (PPP) loan should reevaluate the Employee Retention Credit, which is equal to 50% of eligible wages paid after March 12, 2020. Realty companies that operated a trade or business during a calendar quarter and had a significant decline in gross sales or that at least temporarily stopped operations due to directives from the government are eligible for this credit.
ERC Qualifications for Realty Agencies
Real estate agencies that had their operations entirely or partially halted as a result of guidelines from the government limiting commerce, travel, or group gatherings as a result of COVID-19 may be regarded as qualifying employers for the purposes of the ERC. The realty company is required to pay employees wages that are eligible during that period as long as the government rules are in effect. This was standard in early 2021 and in 2020.
The real estate agency should be regarded as an eligible employer if its gross receipts in the first, second, or third quarters of 2021 are more than 20% lower than the organization’s gross receipts in the comparable calendar quarter of 2019. The criteria for 2020 may be more challenging to achieve because a larger than 50% reduction in gross receipts must be shown.
A realty company is qualified for the full benefits offered under the 2020 ERC calculations if it continues to be an eligible employer under the government mandate test or the gross receipts test and has 100 or fewer full-time employees (on average in 2019). For the 2021 ERCs, this restriction was loosened by increasing the minimum number of full-time employees to 500 or fewer.
PPP Loan
Can realty agencies use the Employee Retention Credit if they receive a PPP loan? They can. As was already stated, one of the best features of the new law is that it enables taxpayers to submit ERC claims as well as apply for PPP loans. Real estate agencies in need of cash infusions in 2020 more frequently turned to PPP loans as a source of funding rather than the ERC because the CARES Act did not initially authorize this overlap. The new law extends the deadline for PPP loans and ERC claims to March 12, 2020. As a result, real estate companies that received PPP loans in 2020 (or who will receive new loans in 2021) can now research potential ERC credits for 2020 and 2021.
