The COVID-19 pandemic has financially impacted many businesses over the last two years. While no government program will likely be able to fully compensate for profits lost due to facility closures and overall loss of business, the Employee Retention Credit (ERC) can provide significant relief. The program was developed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to offer an incentive for qualifying firms to keep people on the payroll and to sustain the business through the financial crisis caused by the epidemic. Changes in company initiatives and incentives have left many people perplexed about ERC credentials. This is why we are here with information on ERC. 

This blog will cover the essential information on ERC, including ERC requirements. So, without further ado, let's start!

What Is ERC?

The CARES Act was established to assist Americans in keeping their employment during the COVID-19 epidemic. As part of this legislation, the Employee Retention Credit was established, which provides a tax credit to firms that keep their employees on the payroll. The credit is worth up to $10,000 per employee per year and is worth 50% of eligible employee earnings.

This implies that the highest credit a company may obtain per employee per year is $5,000. Wages paid between March 13, 2020, and December 31, 2021, are eligible for the credit. The Employee Retention Credit has been revised for 2021, raising the eligible pay percentage to 70%.

The pay cap per employee has also been raised from $10,000 per year to $10,000 per quarter. This update will aid firms in retaining personnel during the epidemic.

A Quick History of the Employee Retention Credit

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 established a refundable employment tax credit for qualifying employers who pay qualified salaries and health plan expenditures.

This tax credit was initially offered from March 13, 2020, to December 31, 2020, for any employer whose company activities were entirely or partially interrupted owing to directives from a governmental body, as well as for other employers who saw a significant drop in gross revenues.

For that time period, the maximum ERC was $5,000 per employee. Subsequent laws amended and expanded the ERC's provisions.

Further, the Consolidated Appropriations Act of 2021 (CAA), which went into effect on December 27, 2020, extended the ERC to cover salaries earned before July 1, 2021. And increased the maximum ERC to $7,000 per employee every quarter.

The American Rescue Plan Act of 2021 (ARPA), which went into effect on April 1, 2021, expanded the coverage period to include salaries earned between July 1, 2021, and December 31, 2021.

Most recently, the IIJA's retroactive cancellation of the ERC as of September 30, 2021, impacts employers who expected to receive the ERC between October 1 and December 31, 2021. Only "recovery starting firms," as defined by ARPA and updated by IIJA, are exempt. These businesses were eligible for the full ERC until December 31, 2021.

With this, it is time to move to the next section of the article, where we will talk about the ERC requirements. 

Who May Claim The Employee Retention Tax Credit? Or What Are ERC Requirements?

The employee retention tax credit is a refundable tax credit for qualifying companies that assists in offsetting the costs of maintaining and rehiring staff.

To be eligible, an employer must have undergone a whole or partial stoppage of activities owing to the COVID-19 outbreak or a considerable drop in gross receipts.

The credit is valid for qualified earnings given between March 13, 2020, and December 31, 2020. Employers can visit the IRS website for further information on eligibility and how to claim the credit.

ERC Requirements

The Employee Retention Credit is a tax credit that firms may use to keep staff and pay salaries during the COVID-19 epidemic.

The credit is accessible to businesses of all sizes impacted by the epidemic, including those who have had to close their doors or decrease their hours of operation. Businesses must have experienced a considerable drop in sales or been forced to close their doors as a result of the epidemic to be eligible for the credit.

The credit is valid for eligible earnings given between March 13, 2020, and December 31, 2020. Businesses can claim up to 50% of qualified salaries, up to a maximum of $5,000 per employee.

If your firm was harmed in any of the ways listed below, you might be eligible for the Employee Retention Credit*:

It is vital to note that a company may be qualified for one quarter but not the next.

If one of the following requirements is satisfied, a firm is eligible:

(a) it suspends activities entirely or substantially during any calendar quarter in 2020 owing to government restrictions restricting trade, travel, or group meetings due to COVID-19.

or

(b) it experiences a decline in year-over-year gross revenues of at least 50% in 2020 or 20% in 2021 during the quarter.

Common Reasons Why Businesses Qualify For Erc

1) Revenue decrease in any of the 2020 and/or 2021 quarters compared to the same quarter in 2019.

2) Complete or partial shutdown of your business

3) Failures in your supply chain or vendors

4) Reduced service offerings

5) A business interruption

6) Inability to visit the job location of a customer

7) Suppliers could not deliver critical items or supplies.

8) Alteration in work roles/functions

9) Inadequate Travel

10) Inadequate Group Meetings

11) Changes in company hours or office closure

Now that you are familiar with ERC requirements, it is time to give an ERC phone call. Didn't get what we were saying? Well, visit the website of Claimer Ccredit and get in touch with them to make the claiming process easy.