The Employee Retention Credit is a tax incentive provided by the U.S. government to encourage businesses, especially those affected by the COVID-19 pandemic, to retain their employees.
ERC can reduce the total tax liability of an eligible employer by providing a refundable credit based on qualified wages paid to employees, resulting in a lower tax bill or a refund on their tax return.
To be eligible for ERC, businesses must meet certain criteria, including experiencing a significant decline in gross receipts or being subject to government-mandated restrictions due to COVID-19.
An employer may be eligible for a credit of up to $5,000 per employee for 2020. For the first half of 2021, an extension of the ERC raised the per-employee ceiling to $7,000 per quarter.
The Employee Retention Credit (ERC) is calculated based on qualified wages paid to employees and is determined on a quarterly basis.
Businesses can still submit ERC claims for 2020 and 2021. For Q1-Q4 2020: ERC claims must be filed by April 15, 2024 and For Q1-Q4 2021: ERC claims must be filed by April 15, 2025.