Who is Eligible for the Employee Retention Credit?

The Employee Retention Credit (ERC) is a refundable tax credit available to companies that want to keep their employees on the payroll. This credit is worth 50% of the qualifying wages paid to employees, and the criteria for eligibility vary depending on the size of the company and the number of employees. Employers can use this credit to recover qualifying income, and disaster loan counselors can help businesses with the complex and confusing ERC and Employee Retention Tax Credit (ERTC) program. To be eligible for the ERC, a portion of an employer's business must have had a partial suspension of operations due to occupancy restrictions for eating indoors. Additionally, employers must have reported total qualifying wages and the ERC related to COVID-19 on Form 941 for the quarter in which the wages were paid.

The employer must also have withheld federal income tax from employees, employee participation in Social Security and Medicare taxes, and the employer's share of Social Security and Medicare taxes for all employees. For businesses with more than 500 employees, they may still qualify as an employee with serious problems and be eligible for credit. To determine eligibility, employers must calculate if the gross revenues of that part of business operations are not less than 10% of gross revenues (determined by the same calendar quarter of 2018) or if the hours of service performed by the employee are that part of the company no less than 10% of the total number of hours of service performed by all employees of the employer's company. If the withheld payroll tax deposits were not sufficient to cover the expected credit amount, employers can file Form 7200 (prepayment of employer credits due to COVID-19) to request prepayment of the remaining amount. To learn more about how to apply for this refundable credit, see How to apply for the employee retention credit. Through this program, billions of dollars in economic stimulus are available, but hundreds of millions of business owners will let most of this money go unclaimed. Schedule a free consultation on the employee retention credit to see how much your company qualifies for.