The Employee Retention Credit (ERC) is a federal tax credit that serves as a lifeline for employers during the challenging times brought by the COVID-19 pandemic. This unique credit is designed to incentivize businesses to retain their employees by providing them with financial support. Unlike a loan, the ERC does not require repayment. It is available for the tax years 2020 and 2021.
In 2020, eligible employers could claim 50% of wages paid, up to a maximum of $10,000 per employee. This allowed businesses to potentially receive a credit of up to $5,000 per employee. The ERC was further enhanced in 2021, increasing to $7000 per employee. Although the official program concluded in 2021, businesses can still file to receive the funds. To qualify, businesses need to have experienced a significant decline in gross receipts after the pandemic compared to the corresponding quarters in 2019.
The ERC is not limited to specific industries or sizes; it is available to a wide range of organizations operating in the United States, including nonprofits, colleges and universities. It also applies for businesses in sectors such as hospitality, retail, and real estate. Additionally, businesses that faced government-imposed suspensions, reduced workforce, limited operations, or other substantial impacts due to COVID-19 may also meet the eligibility criteria.
