The Employee Retention Credit (ERC) is a tax credit available to employers who have been affected by the COVID-19 pandemic. The credit is designed to help employers retain their employees and cover certain expenses related to the pandemic. The ERC was first introduced in the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 and has been extended through 2021.
The ERC is available to employers who have experienced a full or partial suspension of their operations due to government orders related to COVID-19, or who have experienced a significant decline in gross receipts. Employers who qualify for the credit can receive up to $5,000 per employee for wages paid between March 13, 2020 and December 31, 2021.
In order to qualify for the ERC, employers must meet certain criteria. First, employers must have experienced either a full or partial suspension of their operations due to government orders related to COVID-19, or have experienced a significant decline in gross receipts. Second, employers must have paid wages to employees during the period of the suspension or decline in gross receipts. Third, employers must have paid wages to employees for services performed during the period of the suspension or decline in gross receipts. Finally, employers must not have received a Small Business Interruption Loan (PPP loan) for the same wages that are being claimed for the ERC.
The deadline for claiming the ERC is December 31, 2021. Employers must file Form 941 for each quarter in which they are claiming the credit and must include the amount of the credit on Line 9 of Form 941. Employers can also claim the credit on their quarterly estimated tax payments.
The ERC is an important tool for employers who have been affected by the COVID-19 pandemic. It can help employers retain their employees and cover certain expenses related to the pandemic. Employers should be aware of the criteria for claiming the credit and should make sure they file their claim by December 31, 2021 in order to take advantage of this valuable tax credit.
