What is the Employee Retention Credit (ERC)?
The Employee Retention Credit is a refundable tax credit equal to 50% of qualified wages an eligible employer pays to employees from March 12, 2020 to December 31, 2020, AND equal to 70% of qualified wages an eligible employer pays to employees for the first three quarters of 2021.
Between 2020 and 2021, the credit is worth up to $26,000 per employee.
In simpler terms, the ERC is a refund of wages from the U.S. Government to your business for “retaining” employees during the pandemic.
Employers are eligible if they operated a trade or business during the pandemic and experienced either a decline in gross receipts or a full or partial suspension of business operations (to include changes in operations due to government and industry-wide mandates and their effects on day-to-day operations). Therefore, even if a business did not see a decline in revenue or experience an actual shutdown, it may still qualify.
Frequently Asked Questions
My business received the PPP, can I still qualify for the Employee Retention Credit (ERC)?
YES. Although the ERC was initially not available to companies that received the PPP, a retroactive amendment was passed in December 2020 which allows companies to be eligible for the ERC even if they received one (or both!) of the PPP through the SBA. Employers do need to need to identify the wages paid with the PPP and cannot use those as qualified wages for the ERC.
We did not have a drop in revenue, are we still eligible for the ERC?
YES. Companies can either qualify due to a drop in gross receipts over a certain threshold -OR- due to a full or partial suspension in business operations (to include changes in operations due to government and industry-wide mandates and their effects on day-to-day operations). We have helped many businesses who have been more profitable than ever but still qualified due to government mandates.
We have not experienced any direct government mandates or suspensions of operation during the pandemic, can we still qualify?
YES. The law, and subsequent IRS guidance, has made it clear that your business operations only need to have been impacted by ANY local, state, or federal government order in more than a nominal amount.
We are an “essential” business, are we eligible for the ERC?
YES. “Essential” businesses can qualify the same way, by meeting either the revenue drop OR government order eligibility requirements. The law does not differentiate between essential and non-essential businesses.