Who Qualifies for the Employee Retention Credit (ERC)?

The Employee Retention Credit (ERC) under the CARES Act encourages businesses to keep their employees on payroll. This law allowed some employers most affected by financial difficulties to be able to claim the credit against the qualified salaries of all their employees, rather than just those who did not provide services. Before filing a claim with the ERC, employers must fully understand their background and best practices in order to prepare for a possible IRS ERC audit.Many companies have been financially impacted by the COVID-19 pandemic in the past two years and, while it is likely that no government program can fully compensate for the profits lost due to the closure of facilities and the general loss of business, the Employee Retention Credit (ERC) can help provide significant relief.So who is eligible for the Employee Retention Credit? To be eligible for the Employee Retention Credit, nonprofit organizations and private companies must meet one of the two following criteria. The most up-to-date employee retention credit requirements remain similar to the original stipulations established by the IRS.

It also included the addition of special qualifications for employers with severe financial difficulties or who are part of a recovering startup. To do this, it is necessary to understand how this program works, who qualifies for the ERC and how to claim it.If you want to apply for your employee retention credits, you can only apply for qualified salaries that are not counted as payroll under the PPP's loan forgiveness program. Consequently, it is important to ensure that all eligible expenses, including non-payroll costs, such as utility, rent and operating expenses, to name a few, are included in PPP loan forgiveness requests in order to maximize the qualifying salaries available to the ERTC.So what is this credit and who qualifies for the Employee Retention Tax credit? To qualify for an ERC, employers must meet certain criteria. First, they 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.Second, employers must have experienced a significant decline in gross receipts during a calendar quarter compared to the same quarter in 2019.Employers must also meet certain requirements related to their size and number of employees.Windes tax professionals understand the complexity of the ERC program and all the many changes enacted by the IRS.

You may consider working with a professional business tax firm to discuss your tax planning and filing strategy in relation to ERC and other issues related to COVID-19.Changes in programs and incentives for companies have made it difficult for many people to understand ERC qualifications. When determining the qualifying salaries that can be included, the employer must first determine the number of full-time employees.

Denise Lefler
Denise Lefler

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