To qualify for the Employee Retention Credit (ERC), there are several requirements that a business must meet. Here are the main criteria:
- Gross receipts declined by more than:
- 50% when comparing 2020 to 2019
- 20% when comparing 2021 to 2019
- Additionally, there are different requirements for eligibility for wages paid in 2020 versus 2021.
- For wages paid in 2020:
- The business must have had an average of 100 or fewer full-time employees in 2019, or
- The business must have had an average of 500 or fewer full-time employees in 2019 and experienced a decline in gross receipts of more than 50% compared to the same quarter in the previous year.
- For wages paid in 2021:
- The business must have had an average of 500 or fewer full-time employees in 2019, or
- The business must have had an average of more than 500 full-time employees in 2019 and experienced a decline in gross receipts of more than 90% compared to the same quarter in the previous year.
- Business operations were fully or partially suspended due to government orders related to COVID-19, or
- Supply Line Interruptions
Once a business determines that it meets the eligibility requirements, it can claim the ERC on qualified wages paid to employees during the eligible period. The credit is calculated as a percentage of the qualified wages, up to a maximum of $26,000 per employee if they qualify for the entire ERC period.
It’s important to note that there are other rules and limitations related to the Employee Retention Credit, such as restrictions on double-dipping with other relief programs like the Paycheck Protection Program (PPP). Businesses should consult with a tax professional to ensure that they are meeting all requirements and properly claiming the credit. If you would like to talk to one our tax professionals, please follow the link and one of our experiences tax professionals will contact you regarding your eligibility or answer any questions you may have.