Answers to Your Top 6 Questions About the Employee Retention Tax Credit

The Employee Retention Credit is a refundable tax credit included in the Coronavirus Aid, Relief, and Economic Security Act of 2020. The program helps employers offset the cost of retaining employees by providing a payroll tax break.

To be eligible for the credit, your business must have:
• Experienced a full or partial suspension of operations due to a federal, state, or local government order.
• Had a decline in gross receipts of more than 50% when comparing any quarter in 2020 to the same quarter in 2019. Or a 20% decline for 2021 compared to the same quarter in 2019.
• Less than 500 employees.

For 2020, the credit is 50% of qualified wages paid to employees between March 12, 2020, and December 31, 2020, up to $10,000. For 2021, the tax credit is up to $7,000 per employee per quarter for the 1st through 3rd quarter.

The credit is claimed on the employer’s quarterly payroll tax return (Amended Form 941x). For employers who pay wages semi-weekly, the credit is claimed on the first return filed after the end of the 2nd quarter.

Yes. The Employee Retention Credit and the Payment Protection Program were different programs. The PPP was a loan provided to small businesses to help them keep them from going under during the pandemic. The ERC is a tax credit available to companies that continued to employ workers during that period. So, you can apply for the ERTC even if you received a PPP loan.

Yes, but despite the October 1, 2021 expiration date, businesses have three years to file for a retroactive ERC refund which is a July 31st 2023 deadline.