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ERC

EMPLOYMENT RETENTION CREDIT

WHAT IS IT?

The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to a percentage of the wages an employer pays to employees. This credit is part of the U.S. government’s response to support businesses during the COVID-19 pandemic and subsequent economic downturn.

ELIGIBILITY CRITERIA

    • Affected Employers: The credit is available to all employers, regardless of size, including tax-exempt organizations. However, state and local governments and their instrumentalities are not eligible.
    • Economic Hardship: Employers must demonstrate that they have experienced a significant decline in gross receipts or were fully or partially suspended due to government orders related to COVID-19 during the calendar quarter.

    CALCULATION OF THE CREDIT

    • The credit amount varies depending on the calendar quarter and specific criteria met by the employer.
    • It is generally calculated as a percentage of qualified wages paid to employees, up to a certain limit per employee.

    F.A.Q.

    Who is eligible to claim the Employee Retention Credit?

    Eligibility for the ERC depends on your specific facts and circumstances.

    Eligible employers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and December 31, 2021. However, to be eligible, employers must have either:

    A self-employed individual who has employees and who otherwise meets the requirements to be an eligible employer may be eligible for the ERC based on qualified wages they paid to employees. Self-employed individuals can’t include their own self-employment earnings or wages paid to related individuals when calculating the credit.

    Employers in U.S. territories are eligible to claim ERC if they meet other eligibility requirements. For information about qualified wages paid by employers in U.S. territories, see Notice 2021-20, Section III.A, Question 4.

    Who is not eligible to claim the ERC?

    You don’t qualify for the ERC if you didn’t operate a business or tax-exempt organization with employees.

    Some examples of taxpayers who are not eligible to claim the ERC and are often targeted by ERC scam promoters include:

    • Individual taxpayers who are not business owners
    • Employees
    • Retirees
    • Self-employed individuals who do not have employees
    • Household employers
    • Employers that didn’t pay wages to employees during the qualifying time periods
    • Employers who experienced supply chain disruptions but did not experience a full or partial suspension of operations by a qualifying order
    • Government agencies

    Some other limitations or exceptions apply in certain quarters for certain types of employers. See comparison chart.