Is there a deadline to claim the employee retention credit?

The IRS has barriers to prevent wage increases from being factored into the credit once the employer is eligible to receive the employee retention tax credit. Some tax advisors are misstating the rules related to the deadlines for employee retention credit (ERC) applications. If you didn't apply for the employee retention tax credit, you may be able to apply for it retroactively. For more information and examples, see Determining the maximum amount of an eligible employer's employee retention credit.

The ERTC is a refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. Skilled nursing facilities have tended to avoid the employee retention credit because of their complexity, even though they are likely to meet the eligibility requirements. Companies can no longer pay salaries to apply for the employee retention tax credit, but they have until 2024 and, in some cases, 2025, to analyze their payrolls during the pandemic and apply for the credit retroactively by filing an amended tax return. Employers with 100 or fewer full-time employees can use all the salaries of employees who work, as well as any paid time that they are not working, with the exception of paid vacation provided under the Families First Coronavirus Response Act.

For more information on how to apply for the refundable employee retention credit, see How to apply for the employee retention credit. The credit is fully refundable because the eligible employer can receive a refund if the amount of the credit exceeds certain federal employment taxes owed by the eligible employer. The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax credit. The employee retention credit is a fully refundable tax credit for employers that is equivalent to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay to their employees.

While the Employee Retention Tax Credit (ERTC) program has officially expired, this does not affect a company's ability to apply for the ERTC retroactively. People who have more than 100 full-time employees can only use the qualified salaries of employees who do not provide services due to the suspension or decline of business activity. For more information, see Determining which employers are eligible to apply for the employee retention credit.