How To Qualify For The Employee Retention Credit (ERC)

The Employee Retention Credit (ERC) program is a tax credit designed to help eligible employers keep their employees on payroll during the COVID-19 pandemic. To qualify for the ERC, employers must meet certain criteria, including:

1. Experiencing a significant decline in gross receipts: To qualify for the ERC, employers must have experienced a significant decline in gross receipts compared to a prior period. Specifically, for 2020, employers must have experienced a decline of at least 50% in gross receipts for a calendar quarter compared to the same quarter in 2019. For 2021, employers must have experienced a decline of at least 20% in gross receipts for a calendar quarter compared to the same quarter in 2019.
2. Partial or full suspension of operations: Alternatively, employers can qualify for the ERC if they experienced a partial or full suspension of operations due to a government order related to COVID-19. This can include orders to shut down or reduce operations, or orders that limit customer capacity or hours of operation.
3. Having fewer than 500 employees: To be eligible for the ERC, employers must have fewer than 500 employees. For 2021, however, employers with up to 500 employees can claim the ERC for all employees, not just those who are unable to work due to COVID-19-related reasons.
4. Continuing to pay employee wages: To claim the ERC, employers must continue to pay employee wages during the eligible period. This can include wages paid to employees who are not able to work due to COVID-19-related reasons, as well as wages paid to employees who are able to work but are not working due to a lack of business.

If your business meets these criteria, you may be eligible for the ERC. It's important to note that the ERC can be claimed for wages paid from March 12, 2020, through December 31, 2021, and the credit amount can vary depending on the size of your business and the wages paid to your employees.