The Employee Retention Credit (ERC) is designed to encourage employers whose businesses have been negatively affected by COVID-19 to keep employees on payroll.
The ERC is a refundable tax credit of up to $5,000 per employee for 2020; the credit for 2021 can be up to $7,000 per employee per quarter for 2021. The ERC is available to businesses and other employers, including nonprofit organizations. To qualify, your organization must have been adversely affected in one of two ways:
- Been fully or partially suspended by government order during the quarter
- Had a significant decline in gross receipts
- For 2020, gross receipts fall below 50% of the same quarter in 2019
- For 2021, gross receipts fall below 20% of the same quarter in 2019
Under the CARES Act, if you chose to take PPP loan funding, you were not eligible to receive the ERC. This rule was changed retroactively by the Consolidated Appropriations Act of 2021—employers can now take the ERC even if they received a PPP loan. However, the same wages cannot be used for both programs.
Understanding the Criteria
Understanding if you qualify for the ERC is just the beginning. There is also much to consider about how to take the credit, which employees qualify and more. In addition, the IRS has also released additional guidance surrounding the use of the ERC. How do you begin to keep track of it all?
Get help to maximize your potential under the ERC
Eide Bailly has a designated team ready to help you maximize the ERC and its benefits for your organization. Specifically, we can help you:
- Identify if you do qualify for the ERC
- Outline and model various ERC calculations
- Help you to claim the full amount of the credit
- Ensure proper payroll tracking and documentation