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EMPLOYEE RETENTION TAX CREDIT

What is the Employee Retention Credit (ERC)?

ERC is a stimulus program designed to help those businesses that were able to retain their employees during the Covid-19 pandemic.  Established by the CARES Act, it is a refundable tax credit – a grant, not a loan – that you can claim for your business. The ERC is available to both small and mid-sized businesses. It is based on qualified wages and healthcare paid to employees.

Highlights:

  • Up to $26,000 per employee

  • Available for 2022 and the first three quarters of 2021

  • Qualify with decreased revenue or COVID event

  • No limit on funding

  • ERC is a refundable tax credit
     

How much money can you get back?

  • You can claim up to $5,000 per employee for 2020.  For 2021, the credit can be up to $7,000 per employee per quarter

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How do you know if your business is eligible?

To qualify, your business must have been negatively impacted in either of the following ways:

  • A government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel or restrictions of group meetings.

  • Gross receipt reduction criteria is different for 2020 and 2021, but is measured against the current quarter as compared to 2019 pre-COVID amounts.

  • A business can be eligible for one quarter and not another.

  • Initially, under the CARES Act of 2020, businesses were not able to qualify for the ERC if they had already received a Paycheck Protection Program (PPP) loan. With new legislation in 2021, employers are now eligible for both programs. The ERC, though, cannot apply to the same wages as the ones for PPP.

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Frequently Asked Questions (FAQs)

What period does the program cover?

 

The program began on March 13th, 2020 and ends on September 30, 2021, for eligible employers.

 

You can apply for refunds for 2020 and 2021 after December 31st of this year, into 2022 and 2023. And potentially beyond then too.

 

We have clients who received refunds only, and others that, in addition to refunds, also qualified to continue receiving ERC in every payroll they process through December 31, 2021, at about 30% of their payroll cost.

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We have clients who have received refunds from $100,000 to $6 million.

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Do we still qualify if we already took the PPP?

 

Yes. Under the Consolidated Appropriations Act, businesses can now qualify for the ERC even if they already received a PPP loan. Note, though, that the ERC will only apply to wages not used for the PPP.

 

​Do we still qualify if we did not incur a 20% decline in gross receipts?

Your business qualifies for the ERC, if it falls under one of the following:

  • A government authority required partial or full shutdown of your business during 2020 or 2021. This includes your operations being limited by commerce, inability to travel or restrictions of group meetings.

  • Gross receipt reduction criteria is different for 2020 and 2021, but is measured against the current quarter as compared to 2019 pre-COVID amounts.

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Do we still qualify if we remained open during the pandemic?

Yes. To qualify, your business must meet either one of the following criteria:

  • Experienced a decline in gross receipts by 20%, or

  • Had to change business operations due to government orders

Many items are considered as changes in business operations, including shifts in job roles and the purchase of extra protective equipment.

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