The Employee Retention Tax Credit (ERC)

September 29, 2022 News

As a component of the Cares Act assistance package, the Employee Retention Credit, or ERC, was initially introduced during the early stages of the COVID-19 epidemic. It was meant to serve as an additional incentive for smaller enterprises to keep their staff, but the Payment Protection Program largely eclipsed it.

The ERC was once again approved for 2021, however it is still accessible retroactively for 2020. It’s significant to note that small enterprises who obtained PPP loans may also apply for the ERC.

Is My Small Business Eligible for the ERC?

Although all sizes of businesses can benefit from ERC, the program gives small firms the advantage over larger employers. Here, you may learn if you’re eligible for the ERC and how to get your credit as soon as possible.

For the 2020 tax year, a small firm is one with 100 or fewer full-time employees on average every month in 2019. For the tax year 2021, the term has been enlarged to encompass companies with 500 or less full-time employees on average per month in 2019.​

Do You Qualify for an Employee Retention Tax Credit?

  • Number of employees
    • 2020 tax year: 100 or fewer employees
    • 2021 tax year: Fewer than 500 employees
  • Impacted by pandemic
    • Meet one of the following conditions
      • Reduced revenue in 2020 or 2021 resulting from government mandates
      • Drop in revenue
        • 2020 tax year: less than 50% of 2019 receipts
        • 2021 tax year: less than 80% of 2019 receipts

Can I Get ERC if I Received PPP?

Even if a business gets a 100% PPP loan forgiveness, they may still be eligible for ERC.

How Do I Receive My Employee Retention Credit?

First, speak with your accountant or tax expert before completing any forms. They will support you as you lead your company through this. A tax expert who specializes in ERC will be well worth the cost because eligibility may be difficult to determine, especially if you sought for PPP debt forgiveness.

Can Freelancers or Independent Contractors Receive ERC?

Unfortunately, LLC owners and independent contractors are not qualified to receive an ERC as employees.

You may also like