What is the Employee Retention Credit (ERC)?
The ERC is a stimulus initiative designed to assist businesses that successfully retained their employees during the challenging Covid-19 pandemic. Established by the CARES Act, it offers a refundable tax credit you can claim for your business. The ERC is accessible to small and mid-sized businesses based on qualified wages and employee healthcare expenditures.
Businesses can receive up to $26,000 per employee and take advantage of this program for 2020 and three quarters of 2021. Qualification is determined by decreased revenue or a COVID event, and no funding limit exists. The ERC is a refundable tax credit.
How much can your business reclaim?
In 2020, you can claim up to $5,000 per employee. For 2021, the credit can reach up to $7,000 per employee per quarter.
Is your business eligible for the ERC?
To qualify, your business must have been negatively impacted in either of the following ways:
- Government authority requires a partial or complete shutdown of your business during 2020 or 2021, including limitations on operations, travel restrictions, or group meeting restrictions.
- Gross receipt reduction criteria differ for 2020 and 2021, but it is measured against the current quarter compared to pre-COVID amounts 2019. Eligibility can vary between quarters. Under the CARES Act of 2020, businesses were previously disqualified for the ERC if they received a Paycheck Protection Program (PPP) loan. However, new legislation in 2021 now allows employers to qualify for both programs.