The Employee Retention Credit (ERC) is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to Dec. 31, 2021. Eligible employers can claim the ERC on an original or adjusted employment tax return for a period within those dates.
Only recovery startup businesses are eligible for the ERC in the fourth quarter of 2021.
Employee Retention Credit – 2020 vs 2021 Comparison Chart
Who Is Eligible
An employer is eligible for the ERC if it:
- Sustained a full or partial suspension of operations limiting commerce, travel or group meetings due to COVID-19 and orders from an appropriate governmental authority or
- Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021 or
- Qualified in the third or fourth quarters of 2021 as a recovery startup business.
Limitations
- Wages reported as payroll costs for PPP loan forgiveness or certain other tax credits can’t be claimed for the ERC in any tax period.
How to Claim
Follow guidance for the period when qualified wages were paid:
- After March 12, 2020, and before Jan. 1, 2021
- After Dec. 31, 2020, and before July 1, 2021
- After June 30, 2021, and before Oct. 1, 2021
- After Sept. 30, 2021 and before Jan. 1, 2022