Not sure if your business qualifies for the Federal Employee Retention Credit (ERC)? Learn more about eligibility below.
What is the Federal Employee Retention Credit (ERC)?
Business owners who’ve been impacted by the COVID-19 pandemic may claim the Federal Employee Retention Credit (ERC). This refundable tax credit was first created by the CARES Act to incentivize businesses to retain their employees. Since its original enactment, the ERC rules have been amended several times to include many more businesses.
What period of time does the ERC cover?
The ERC offers a credit for each employee retained from March 12, 2020, through October 1, 2021, for eligible businesses whose operations were suspended or partially slowed down during the pandemic. If your business is a “Recovery Startup Businesses” (established after February 15th, 2020), you may qualify for the ERC for each employee until December 31,2021 provided your average annual gross receipts do not exceed $1,000,000.
How does my business qualify and how does it work?
Here is what you need to know about eligibility and how to qualify.
- Companies with up 500 employees are eligible.
- Companies with 5 or more employees on W2 are eligible.
- You must be able to show a reduction of 20% in gross receipts from 2021 (or 50% in 2020) compared to 2019 (on a quarter versus quarter comparison).
- You can take the ERC as reductions to payroll taxes or as advanced payment.
How much money can my business receive?
You can receive credits of up to $26,000 per employee.
I already took a PPP loan. Can my business get the ERC too?
Yes! According to the IRS, “an employer that is eligible for the Employee Retention Credit (ERC) can claim the ERC even if the employer has received a Small Business Interruption Loan under the Paycheck Protection Program (PPP). The eligible employer can claim the ERC on any qualified wages that are not counted as payroll costs in obtaining PPP loan forgiveness. Any wages that could count toward eligibility for the ERC or PPP loan forgiveness can be applied to either of these two programs, but not both.”
How can I apply?