Employee Retention Tax Credit FAQ’s

What is the Employee Retention Tax Credit (ERC)?

  • The ERC is a refundable payroll tax credit that is available to employers who retain their W2 employees by keeping them on the payroll.
  • Owners receive ERC benefits in the form of a check from the IRS for every qualifying quarter.

How much ERC can I claim?

  • For 2020 you can claim up to 50 percent of qualified wages up to a maximum amount of $5,000 for the year for every eligible employee. 
  • For 2021, you can claim up to 70 percent of qualified wages up to a maximum amount of $7,000 for each of first 3 quarters in 2021 ($21,000 for the year) for every eligible employee.

How do I know if I’m eligible for the ERC?

  • If you have 500 or fewer Full-time W-2 employees and incurred gross revenue declines in 2020 and/or 2021 relative to the same quarters in 2019 or were “Nominally Impacted” by governmental restrictions, your business may qualify. 
    • For 2020, any drop in gross income in any quarter of 50% or more relative to the same quarter in 2019.
    • For 2021, any drop in gross income in any of the first 3 quarters of 20% or more relative to the same quarters in 2019.
    • For both years, having been nominally impacted due to governmental restrictions resulting in any drop in gross income of 10% or more, or other significant changes in doing business (such as having to rent extra or temporary space).

How many W-2 employees can a company have and qualify for ERC?

  • You can qualify for ERC if you have no more than 500 Full-time employees. 
    • You can have more part-time W-2 employees and still qualify.
    • When multiple companies are operated under a single control group, they are considered one company for employee-count qualification.

What are the qualifying periods for the ERC Program?

  • The qualifying periods for ERC are all 4 quarters of 2020 and the first 3 quarters of 2021.

How long does it take to receive ERC?

  • Typically, around 6 months from filing the required forms, although some owners are receiving their benefits in as soon as 4 months or as long as 8 months.

I got PPP, can I qualify for ERC?

  • Yes, but any wages paid with PPP funds are not considered qualified wages for ERC (This is sometimes called “double-dipping” and it’s not allowed).

I already filed my 2020 taxes, but I didn’t claim the credit. Can I do so retroactively?

  • Yes, If you already filed your taxes for 2020, you can retroactively claim the credit.

Do W-2 wages paid to owners or their families qualify for ERC?

  • No. Owners who control 50.1% of the business, their spouses, and their family members are exempt from ERC credits.

What’s considered a full-time employee for ERC?

  • For the purposes of the ERC, a full-time employee is defined as one that in any calendar month worked at least 30 hours per week or 130 hours in a month.

What’s a qualified wage?

  • Any wages for which you pay FICA or group health expense.

My business didn’t start operating until after February 15, 2020. What is a Recovery Startup Business and can I still claim a credit?

  • If your business started after February 15, 2020 and your gross receipts are under $1M, you may qualify for ERC as a Recovery Startup Business. You don’t have to demonstrate a loss in gross receipts in order to qualify for ERC. 
  • This is the only type of business eligible for ERC in Q4 of 2021.