The federal government has established the Employee Retention Credit (ERC) to help companies cover the cost of keeping their staff employed. This refundable payroll tax credit is available to eligible employers who can apply for the ERC for previous quarters by filing the appropriate adjusted employment tax return within the deadline set out in the instructions on the corresponding form. The ERC is a great way for employers to help offset the costs associated with keeping their employees on payroll. It is a refundable payroll tax credit that can be applied to wages paid from March 13, 2020 through December 31, 2020.
The amount of the credit is equal to 50% of qualified wages paid up to $10,000 per employee for all calendar quarters. To be eligible for the ERC, employers must have experienced a full or partial suspension of operations due to orders from a governmental authority limiting commerce, travel, or group meetings due to COVID-19. Additionally, employers must have experienced a significant decline in gross receipts during the quarter compared to the same quarter in 2019. The amount of the credit is based on qualified wages paid to employees during each quarter. Qualified wages are wages paid to an employee for time they are not providing services due to a full or partial suspension of operations or a significant decline in gross receipts. The maximum amount of qualified wages that can be taken into account for each employee is $10,000 per quarter.
The ERC is a great way for employers to help offset the costs associated with keeping their employees on payroll during these difficult times. Employers should take advantage of this opportunity and apply for the ERC as soon as possible.