The employee retention credit under the CARES Act encourages companies to keep employees on their payroll. The ERTC is a refundable credit that companies can request on qualifying salaries, including certain health insurance costs, paid to employees. For more information and examples, see Determining the maximum amount of an eligible employer's employee retention credit. 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.
The notice includes guidance on how employers who received a PPP loan can retroactively apply for the employee retention tax credit. 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. The employee retention credit is equivalent to 50 percent of the qualifying wages (including qualifying health plan expenses) that an eligible employer pays in a calendar quarter. The employee retention credit was a refundable tax credit intended to allow small business owners to continue paying their employees during the COVID-19 pandemic.
For more information, see Determining which employers are eligible to apply for the employee retention credit. The IRS has protective measures to prevent wage increases from being counted for the credit once the employer is eligible to receive the employee retention tax credit. Also, remember that if a customer has applied for a PPP loan and will be forgiven for it, they can now be eligible for the employee retention credit with certain salaries. 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.
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. The ERC was a tax credit in which business owners received a refundable tax credit for keeping employees on the payroll during the COVID-19 pandemic. Business owners who weren't recovering startups weren't eligible for the employee retention credit for wages paid after September 31. The employee retention credit applies to workers employed full or part time if their employers met the requirements. 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.
