ERC - Employee Retention Tax Credit Overview
The continuation and expansion of the Employee Retention Tax Credit (ERC or ERTC) in 2021 warrants serious consideration by all employers, including nonprofits. With some review and planning, you may be able to claim up to $19,000 in payroll tax credits per employee!
Initially launched under the 2020 CARES Act, ERC provides a quarterly payroll tax credit to eligible employers impacted by COVID-19 (e.g., limited operations due to government orders or significant quarterly decline in gross receipts). The second stimulus law passed in December 2020 significantly expands eligibility for employers to claim ERC, including some updates that can be applied retroactively to 2020. Notably, employers who had PPP loans may be able to claim ERC. (Note: ERC cannot be claimed on wages that were included in PPP forgiveness or FFCRA credits).
Under the CARES Act, the maximum ERC credit is capped at $5,000 in qualified wages paid per employee for the entire 2020 period, which can be claimed retroactively. 2021 ERC updates increase the maximum credit to $7,000 in qualified wages paid per employee for each of the first two quarters in 2021. All told, that’s a potential payroll tax credit of $19,000 per employee!
ASAP ERC Support Services
If you're a current ASAP Accounting & Payroll client, check out our ERC Support Services for help in navigating this complicated process and start claiming thousands in payroll tax credits.
To get started, answer a few questions to help confirm your ERC eligibility. If you're eligible (or fairly certain of ERC eligibility), complete our ERC Support Services Request Form to request a free consultation and learn more about how we can help you claim up to $19,000 in payroll tax credits per employee.
ERC FAQs & Resources
2021 ERC Overview Video
Watch our video for an overview of 2021 updates to ERC, as well as considerations for using ERC with Paycheck Protection Program (PPP) loans:
Who is eligible for 2021 ERC?
Employers, including tax-exempt organizations, are eligible for ERC in 2021 if they meet one of the following criteria:
- Full or partial suspension of business operations during 2021 as a result of government order - OR -
- Greater than 20% decline in last quarter of 2020 compared to same quarter of 2019 - OR -
- Gross receipts for calendar quarter in 2021 are less than 80% of gross receipts for same calendar quarter in 2019
How does ERC work with credits for FFCRA emergency paid leave?
Wages for which you received FFCRA credit do not count toward ERC qualifying wages.
Can I claim ERC if I have a Paycheck Protection Program (PPP) Loan?
YES! PPP borrowers can now use ERC, but both programs cannot be used on the same wages. And if you had a PPP loan in 2020, you may be able to claim ERC for qualifying quarters (based on 2020 ERC calculations).
Source: IRS Announcement, Employers May Be Able to Claim the Employee Retention Credit and Have a PPP Loan
IRS ERC Resources
Navigating the IRS website for updated ERC resources can get complicated. Use the following links to directly access IRS ERC resources:
- IRS "New" ERC News Release (Jan. 26, 2021)
- Revised IRS Guidance for 2020 ERC (Notice 2021-20; March 1, 2021)
- IRS ERC Web Page (NOTE: 2021 ERC updates still in-progress)
- IRS ERC FAQs (NOTE: 2021 ERC updates still in-progress)
Disclaimer: This information is provided as a self-help tool and does not constitute legal or financial advice. Laws, regulations and lending products are changing daily and decisions as to whether or how to use this information and/or what actions to take in response to the COVID19 Pandemic are solely those of the employer. The providers of this information disclaim any and all responsibility and liability for its accuracy, completeness or fitness for your particular business purposes.
ASAP does not automatically provide policies or tracking.
Please reach out to your account manager for more information.