What Is Employee Retention Credit And Its Criteria?

3 min read

What Is Employee Retention Credit And Its Criteria?

Covid has impacted our lives. Not only our lives, but it has also hampered our businesses in many ways. This is why the government came up with a solution. And it introduced Employee Retention Credit. But unfortunately, many of us are still unaware of its criteria. So, here in this blog, we will discuss ERC criteria, starting with what ERC is. 

Without further ado, let's dive deep into the blog. 

What Is Employee Retention Credit?

The ERC- Employee Retention Credit is a refundable tax credit available to the employers to recover from the impact of COVID-19 pandemic. It was established as part of the CARES Act in 2020 and was extended through 2021 by the Consolidated Appropriations Act 2021. The American Rescue Plan Act of 2021 has also extended the ERC to cover certain wages paid between July 1, 2021, and December 31, 2021. 

Further, the Employee Retention Credit (ERC) is a refundable credit against certain employment taxes equal to 50% of the qualified wages. This includes allocable qualified health plan expenses that an eligible employer pays to employees. The credit is available for wages between March 13, 2020, and December 31, 2021.

What Is Employee Retention Credit Criteria?

The Employee Retention Credit (ERC) is a tax credit that helps employers to recover from the  COVID-19 impact. They do so by keeping their employees on the payroll.

The specific criteria for eligibility for the ERC include the following:

A considerable decrease in gross receipts or a suspension of trade or business due to government orders related to COVID-19

Or, The employer is a business that begins operations after February 15, 2020, and before January 1, 2022.

To be considered a suitable employer for the credit, an employer must meet one of the two above criteria and have paid employees qualified wages.

Qualified wages are paid to employees during the period in which the employer's business is either fully or partially suspended by government order due to COVID-19. Or the employer encounters a substantial decline in gross receipts.

It's also worth noting that certain employers are not eligible for the credit, such as:

  • Federal, state, and local governments
  • Tax-exempt organizations, including churches and religious organizations
  • Employers receiving small business interruption loans under the Paycheck Protection Program.

It is important to consult with your tax professional or the IRS to ensure that your business qualifies and that you understand the necessary steps to claim the credit.

To know more about ERC, you can go for ERC contacts. To get in touch with the best ERC contact, switch to the Claimer credit website. 


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