About Employee Retention Tax Credit (ERC)
What is an ERC?
The Employee Retention Credit (ERC) is a Payroll Tax Credit designed to reward businesses for retaining employees during COVID-19. The credit was initially signed into law March 2020 as part of the CARES Act. The credit was later expanded upon with the Consolidated Appropriations Act in December 2020 and the American Rescue Plan Act in June 2021.
Business Owners can receive a refundable credit up to $5,000 per employee in 2020, and $7,000 per employee, per quarter (excluding the 4th quarter), in 2021 for qualified wages. This can total up to $26,000 per employee.
Who Is Eligible To Claim An ERC?
You may be eligible if you had W2 Employees in 2020 or 2021 (1099 contractors do not count) and if ANY of the following occurred (even if you already received a PPP loan):
1. If You Had A Reduction In Revenue - results in a credit for each quarter affected.
50% Reduction In 2020 - If there is a reduction in your gross receipts in 2020 when comparing to the same quarter in 2019 by at least 50%.
20% Reduction in 2021 - If there is a reduction in your gross receipts in 2021 when comparing to the same quarter in 2019 by at least 20%
2. Or If Your Business Was Impacted By A Government Mandate -could result in a credit per date range selected.
If a governmental order had more than a nominal impact on your business operations, such as:
- Required to fully or partially suspend operations tied to governmental orders.
- Inability to obtain critical goods or materials from suppliers because they were required to suspend operations due to governmental orders.
- Limiting occupancy to provide for social distancing due to governmental orders.
- Governmental orders to shelter in place preventing employees from going to work.
- Other similar impacts from the government.
3. Or If You Started A Business After February 15, 2020 - you may qualify for ERC via the Recovery Start-Up Program as long as your gross sales did not exceed $1,000,000.