The Employee Retention Credit (ERC) is a refundable tax credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. 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 IRS has barriers in place to prevent wage increases from being factored into the credit once the employer is eligible to receive the ERC. However, companies can still apply for the credit retroactively until 2024 or 2025, depending on their circumstances.
Skilled nursing facilities have tended to avoid the employee retention credit due to its complexity, even though they are likely to meet the eligibility requirements. Companies 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. 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 on how to apply for the refundable employee retention credit, see How to apply for the employee retention credit.
The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax credit. 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. For more information on which employers are eligible to apply for the employee retention credit, see Determining which employers are eligible to apply for the employee retention credit. The ERTC program has officially expired, but this does not affect a company's ability to apply for it retroactively.
