The Employee Retention Credit (ERC) was created with the passing of the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020 and expanded with the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA) to encourage businesses to keep employees on payroll during a time of extreme economic uncertainty. Taking advantage of ERC’s potential benefit puts you and your company in a stronger financial position.
Who is eligible?
The legislation defines “small businesses” based on the number of employees in 2019. However, the definition differs each year. It is important to note that companies with more than 500 employees may still qualify for ERC benefits. Please contact us to learn more.
Small Business in 2020: 100 or less average full-time employees in 2019
Small Business in 2021: 500 or average full-time employees in 2019
Claiming periods
ERC benefits are available from March 13, 2020 – September 30, 2021. Claims filed between March 13 – December 31, 2020 can earn a maximum benefit of $5k per employee.
Claims filed between January 1 – September 30, 2021 can earn a maximum benefit of
$21k per employee. All quarters can be amended for up to 3 years.
Benefits of ERC
- Up to $26,000 per employee retained.
- Fully refundable credit – If credits accrued exceed amount of tax due, the employer will receive a refund in the amount of the difference.
- The credit is available to employers regardless of whether they took PPP loans.
- The availability of funds for tax years 2020 and 2021 can provide crucial funding for future payroll, equipment purchases, infrastructure, or special projects
Qualifying for ERC
2020:
- Qualified companies must have experienced a government mandated partial/full shutdown, or
- Experienced a >50% decrease in gross receipts per quarter compared to 2019
2021:
- Qualified companies must have experienced a government mandated partial/full shutdown, or
- Experienced a >20% decrease in gross receipts per quarter compared to 2019
