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.