The Employee Retention Credit (ERC) is a refundable payroll tax credit intended to assist businesses impacted by the COVID-19 pandemic. The ERC is available to employers, including tax-exempt and certain government organizations that satisfy either of the following:
- Operations that were fully or partially suspended due to orders from an appropriate governmental authority;
- Has gross receipts for at least one calendar quarter <50% in 2020 (or <20% in 2021) of the gross receipts as compared to 2019;
- Qualifies as a recovery start-up business.
How much can I save?
The ERC can be worth up to $26,000 per employee for the period March 13, 2020 through September 30, 2021. The credit is calculated quarterly provided the employer satisfies eligibility requirements.
When can I use the credit?
Employers claim the credit against payroll taxes. Specifically, the ERC offsets employers’ 6.2% FICA liability (March 13, 2020 through June 30, 2021) and 1.45% Medicare Tax (July 1, 2021 through December 31, 2021), any remaining credit is refunded.
The credit may be claimed retroactively if the employer did not capture the credit on originally filed payroll tax returns.
How do I claim it?
Employers must file amended payroll tax returns (IRS Form 941-x).