About the Employee Retention Credit (ERC)
The Employee Retention Credit (ERC) is a tax credit that was introduced as a part of the CARES Act in March 2020 and extended and expanded by subsequent legislation. The ERC is available to small businesses that have been impacted by the COVID-19 pandemic.
To be eligible for the ERC, a small business must meet one of two criteria:
- Partial or full suspension of operations: The business must have experienced a partial or full suspension of operations due to government orders related to COVID-19, or a significant decline in gross receipts.
- Significant decline in gross receipts: The business must have experienced a significant decline in gross receipts, which is defined as a decline of 20% or more in gross receipts in any quarter of 2020 as compared to the same quarter in 2019. For 2021, the decline in gross receipts threshold has been reduced to 10% or more.
In addition to meeting one of the above criteria, there are other requirements that a small business must meet to be eligible for the ERC, including:
- The business must have been in operation before February 15, 2020.
- The business must have fewer than 500 employees.
It's important to note that the ERC is a refundable tax credit, which means that eligible businesses can receive a refund of the credit amount even if they have no tax liability or have already fully offset their tax liability. The amount of the credit depends on various factors, including the number of employees and the amount of qualified wages paid during the eligible period.
