We did a webinar on this so be sure to check out that recording below.

The Employee Retention Credit is a federal government cash award available to virtually every small business (<=100 in 2020 and <=500 employees 2021) in America.

Generally, your business will be entitled to up to $5,000 for every employee in 2020 and up to $28,000 per employee in 2021.

You will qualify for the ERC even if you have received PPP I and PPP II. Food and Beverages companies will qualify for ERC even if awarded an additional Restaurant Revitalization Fund grant.

The ERC is part of the CARES Act, meant to incentivize small to medium sized companies to retain payroll during the pandemic.

The ERC is a refundable credit against the company’s federal payroll taxes.

• You will need to amend the company’s Form 941 for each qualifying quarter
• The IRS will send the company checks for the ERC amount for each qualifying quarter

Eligibility

Under the original law, only operations that were either fully or partially suspended by a COVID-19 lockdown order; or, for any quarter in 2020, if gross receipts were less than 50% of gross receipts for the same quarter in 2019 were eligible.

In 2021, the gross receipts reduction was reduced from 50% to less than 80% of gross receipts for the same quarter in 2019.

Many companies that did not see a qualifying gross receipts reduction will qualify if “partially suspended” due to governmental orders that limit hours of operations, disrupt supply chains, restrict access to the workplace, limit gathering sizes or require slowdowns for cleaning, among other suspension scenarios.

• Gross Receipts Reduction Test
  • To qualify in 2020, the company needs to start with a quarter whose gross receipts went down over 50% compared to the same quarter in 2019.
  • The company will then qualify until the 2020 quarter after it did not have a greater than 20% gross receipts drop compared to the same quarter in 2019.
  • For any quarter in 2021, the company’s gross receipts needs to be down over 20% compared to the same quarter in 2019.
    • You can also apply this test to the prior quarter.
• Full or Partial Suspension of the Company’s Operations Due to a Government Order Related to COVID-19
  
  • Have to do with commerce, group meetings or travel.
  • Above what the IRS considers a “nominal” suspension of the company’s operations.
    • At least at 10% effect on the company’s operations
      In terms of its employee’s time and what they were not able to do due to the Covid government order(s) and when they did in 2019 (the last “healthy” year).
    • Or at least a 10% on the company’s gross receipts

Period of Availability

The original law only included qualified wages paid after March 12, 2020, and before Jan. 1, 2021. Now, the ERC has been extended through December 31st, 2021.

Amount

Under the original law, the amount of the ERC was equal to 50% of the qualified wages paid to the employee, including the cost to continue providing health benefits to the employee. In 2021 the ERC amount is increased to 70% of qualified wages.

Under the original law, ERC was capped $10,000 in qualified wages for all of 2020. In 2021, the qualified wages are $10,000 per quarter, or a maximum ERC of $28,000 for 2021. In all, employers could receive as much as $33,000 per employee for 2020 and 2021.

• For 2020, the ERC is 50% of each employee’s wages, not including any wages that were paid for with PPP1, capped at $5,000 per employee for the year.
• For each qualifying quarter in 2021, the ERC is 70% of each employee’s wages, not including any wages that were paid for with PPP2, capped at $7,000 per employee per qualifying quarter.

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