What is the Employee Retention Credit (ERC)?
The Employee Retention Credit (ERC) has emerged as one of the biggest and most overlooked COVID-19 related tax provisions. Originally part of the CARES Act, the ERC has undergone multiple changes since it was introduced. Most importantly, the Consolidated Appropriations Act made the ERC available to employers that also received Paycheck Protection Program (PPP) loans.
How much money can I receive from it?
If eligibility criteria is met, credits are available for up to 70% of wages and health insurance premiums paid to each employee up to $10,000 for the first three quarters of 2021. Credits are also available for up to 50% of wages and health insurance premiums paid to each employee up to $10,000 for full-year 2020.
For example, a Company with 100 employees can benefit up to $700,000 per quarter during 2021 and $500,000 for the full-year 2020 or $2,600,000 in total. If a Company received a second PPP loan the benefit may be reduced.
How do I know my business qualifies?
Employers are eligible for the ERC if they meet one of the following requirements:
- The business experienced a 20% decline in revenue for the first three quarters of 2021 as compared to the same quarter in 2019.
- The business experienced a 20% decline in revenue for 4th quarter 2020 compared to 4th quarter 2019.
- The business experienced a 50% decline in revenue for the 2nd, 3rd, or 4th quarters of 2020 compared to the same quarter in 2019.
- The business was unable to operate due to governmental orders.