The Employee Retention Credit (ERC) is a tax credit against certain payroll taxes, including an employer’s share of social security taxes for wages paid in 2020 and 2021. For the period between March 12, 2020 and December 31, 2020 the tax credit is 50% of the wages paid, up to $10,000 per employee, capped at $5,000 per employee. For 2021 the ERC is available for the first three quarters, up to $7,000 per employee per quarter.

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Eligibility

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To be eligible a company must experience, either:

 

• A partial or full government shutdown. (The ERC is available only for wages paid during the shutdown.) OR

• A decline in revenue:

  • For 2020 – a 50% decline in revenue in a quarter relative to the comparative quarter in 2019

  • For 2021 – a 20% decline in revenue in a quarter, relative to the comparative quarter in 2019. Alternatively, in 2021, eligibility can be established based on the previous quarter’s 20% decline in revenue, relative to its comparative quarter in the previous year.

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Amount of Eligibility

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For 2020 Q2, Q3 and/or Q4 (for Q2, including March 13 - March 31, 2020), an employer can receive a credit equal to 50% of the first $10,000 of Qualified Wages paid per employee in the aggregate for all qualifying quarters. The maximum ERC for all of 2020 would be $5,000 per employee receiving Qualified Wages.

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For 2021, an employer can receive 70% of the first $10,000 of Qualified Wages paid per employee in each qualifying quarter. The maximum ERC for each such quarter would be $7,000 per employee receiving Qualified Wages, and the maximum ERC for 2021 would be $21,000 per employee receiving Qualified Wages.

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Qualified Wages

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All wages paid to and Qualified Health Plan Expenses paid for all employees for the applicable quarter are considered qualified wages.

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For large employers - employing over 100 full-time employees in 2020 or over 500 full-time employees in 2021 - only wages paid to and Qualified Health Plan Expenses paid for employees for a period or periods that the employees did not perform services for the employer. 

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While an employer who received the PPP may qualify for the ERC, the same wages cannot be used to qualify for forgiveness of a PPP loan and as Qualified Wages for the ERC.

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Claim ERC

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To help determine ERC Eligibility, SBALoans.business has created an ERC Eligibility Calculator. After completing the calculator eligible businesses will be given the option to submit documentation and take the next step towards claiming the ERC Credit.