Frequently asked questions
The ERC is available to any employer—including non-profits, regardless of size—that has experienced either a full or partial shutdown of operations due to a governmental order related to COVID-19, or has experienced a significant decline in gross receipts. A “significant decline in gross receipts” is defined as a decrease of more than 50% when comparing quarterly 2020 receipts to 2019 receipts.
Employers who are part of an affiliated group are only eligible if they meet the above criteria AND the group as a whole has suffered either a shutdown of operations OR a significant decline in gross receipts. For example, if two companies are part of the same parent company and only one company meets the eligibility criteria, the entire group is not eligible for the credit.
The ERC is a refundable tax credit equal to 50% of the qualified wages paid by an eligible employer. To be eligible, an employer must have experienced a decrease in gross receipts of more than 50% when compared to the same quarter in the previous year in 2020 and 2021. The credit is available for wages paid from March 13, 2020 through December 31, 2020. For the 2021 program, the credit is increased to 70%, and the limit is $10,000 per quarter. This means the annual maximum for an employee is $26,000.
The only types of businesses that are not eligible to claim the CARES Act and employee retention credit are federal, state, and local government entities. Self-employed individuals are also ineligible for support, but there are nuance requirements that may allow you to claim.
Tribal governments may be eligible. As you navigate through the application process, you’ll learn quickly what you’re eligible for, and how we can assist you.
If you’re still unsure of whether or not you and your business qualify, start gathering your documents. Applying to determine if you qualify is the only way to know for sure. Even if you’re not eligible under the ERC and CARES Act, you might be eligible for another program.
Yes, ERC stands for ‘Employee Retention Credit’, also known as the ERTC ‘Employee Retention Tax Credit.’ This program was created by the Coronavirus Aid and Relief Act in 2020 to help businesses keep employees on their payroll. Both Employee Retention Tax Credits (ERTC) and Employee Retention Credits are refundable tax credits.
Even if you don’t pay taxes, you can qualify for relief. As the purpose of the ERC is to keep people employed, your business’ tax commitment does not exempt you from claiming. If your business was negatively impacted financially by the COVID-19 pandemic, you are almost certainly eligible for support.
Yes, businesses that were temporarily closed can apply for the Employee Retention Credit (ERC). The ERC is designed to help businesses keep their employees on the payroll during the COVID-19 pandemic. Eligible employers can receive a refundable credit of up to $5,000 per employee for wages paid.
The IRS has extended the ERC support through to 2024. As there is so much uncertainty about the long and short-term impacts of the pandemic, you can support your employees into the future with security by applying today.
The CARES Act is the Coronavirus Aid Relief and Economic Security Act. This $2.2 trillion stimulus bill was passed by President Donald Trump in March of 2020 in order to mitigate the impending impact on businesses under the pandemic.
This fully refundable payroll tax credit applies to many qualified wages that businesses paid to full-time staff between March 13, 2020, and December 31, 2020. The purpose of this act was to ensure businesses could keep their staff on the payroll.
One of the biggest issues for businesses under COVID-19 was mass layoffs. The CARES Act can be claimed immediately so you can keep your employees working, even if your business is being hit hard this decade.
The short answer to this question is “Yes.” Regardless of the size of your business, you can apply for employee retention credit. Whether you run a “trade” or “business” entity, both are seen as the same type of business by the IRS.
The government wants you to be able to keep your employees on the payroll throughout this crisis. If your business has suffered a 50% or more reduction in gross receipts, you can qualify for credit on wages and health care costs.
Qualified wages are compensation provided to employees during an eligible period. An eligible period is either:
a) the time during which the trade or business is fully or partially suspended by a governmental order, or
b) for 2020, any calendar quarter during which gross receipts are 50% less than the amount received during the same quarter of 2019; for 2021, any calendar quarter during which gross receipts are 20% less than the same quarter of 2019
This program is not an “income tax credit” and not related to your annual business tax returns or your profit/loss from the business. Although it is called a tax credit, it is most frequently received as a cash payment from the IRS. You may also use it to offset future payroll tax payments.
Perhaps the most complicated aspect of the ERC program, separate businesses under common ownership that meet IRS Controlled Group criteria must be evaluated together for eligibility. If the tests are passed, all entities are eligible; if not, none are eligible. The ERC is then calculated and filed for each separately.
Submitting an application for the employee retention credit requires you to gather as much evidence as possible to determine how your business was impacted by COVID-19. Some businesses were stopped from operating altogether during the pandemic.
If you were allowed to remain in operation but your incoming revenue took a big hit, find as much information on your losses as possible. You’ll also need to compare your losses to a normal year of operation. The IRS and government need this information from your business operations in 2019.