What You Need to Know About the Employee Retention Tax Credit

Employee Retention Credit or ERC is one of the last COVID-19 stimulus relief programs under the CARES Act. ERC is available for businesses and organizations that have W2 employees. There are $400 billion dollars of funding available. 

The Employee Retention Tax Credit (ETRC), according to the US Treasury is a “refundable tax credit designed to encourage employers to keep employees on their payroll”. Is the ERTC something your business is qualified for? Here’s what you need to know about the Employee Retention Credit and Employee Retention Tax Credit.

What are the Details of ERC Program?

According to ERC Specialists, the ERC is:

• You can get up to $26,000 per employee
• Providing relief for 2020 & Q1 – Q3 2021
• Not a loan and so there is no limit on funding 
• A refundable tax credit 

Who is Eligible for Employee Retention Tax Credit?

According to the US Treasury, the Employee Retention Tax Credit for those applying for 2020:

• All employers regardless of size including tax-exempt organizations. 
• Employers whose businesses were fully or partially suspended by government order due to COVID-19 during the calendar quarter OR employers whose gross receipts are below 50% of the comparable quarter in 2019.

ERC Specialists also said that the

•  Revenue qualifier for 2021 Q1, Q2, and Q3 is 20% gross receipts decline vs 2019 or 2020 same or prior quarter.
• Public colleges, universities, and organizations whose main purpose is to provide medical or hospital care can apply based on 2021 Q1-Q3 earnings.
• Certain federal instrumentalities like credit unions can use 2021 Q1-Q3 to qualify as well. 

Here’s a summary of the qualifications from ERC specialists:

Businesses That Don’t Qualify

According to the US Treasury, businesses that don’t qualify are:

• State and local governments and their instrumentalities and
• Small businesses who take Small Business Loans

Remember to check your eligibility online. 

Tips for Applying for ERTC

• Don’t include PPP money in the gross sales total. Yes, you will be asked about PPP which you should respond to. However, the money from PPP should not be added to your gross sales.
• The application will ask about how COVID-19 affected your business. The pandemic can affect your business both directly and indirectly. For example, if the pandemic affected your supplier and then your business suffered, include that in your application.
• Check your spam folder for important emails. 

In addition to those tips, here are some other things you need to bear in mind:

• If you received money from the Paycheck Protection Program (PPP), you’re still able to apply for the Employee Retention Tax Credit (ERTC). 
• If you’re a start-up, there is a specific start-up component and so you may be entitled to the ERTC. Start up in this context means if you started your business in 2020 or 2021. 
• You can reach out to your payroll company, bookkeeper, or accountant to get access to your 941. According to the IRS, the 941 is used to “Report income taxes, Social Security tax, or Medicare tax withheld from employee’s paychecks.” and “Pay the employer’s portion of Social Security or Medicare tax.”
• There have been many changes to this program from 2020. Therefore, if you didn’t qualify for it in 2020, you should check again now, to see if you qualify. 

Next Steps 

Remember to tell other businesses about this opportunity. Businesses are still struggling due to this pandemic and many could benefit from this program. 
When applying,  make sure you have your financial information in order. Then take this 5-10 minutes survey to see if your qualify. If you qualify, apply for the program and continue to check your email.