The Employee Retention Credit (ERC) was originally passed as part of the CARES Act to help businesses negatively affected by COVID-19. The refundable tax credit encouraged employers to keep employees on their payroll. The ERC was just expanded as part of the year-end COVID-19 relief legislation and now retroactively allows employers that took Paycheck Protection Plan (PPP) loans to also claim the ERC. For 2020 the allowable annual credit is $5,000 per employee. For 2021 the refundable tax credit is $7,000 per employee per quarter for an allowable annual credit of $28,000 per employee. This could be a great opportunity for those that qualify to get some much-needed cash flow relief.
The ERC is available to businesses and employers, including nonprofit organizations. To qualify, your organization must have been adversely affected in one of two ways:
- Been fully or partially suspended by government order during the quarter
- Had a significant decline is gross receipts:
- For 2020, gross receipts fall below 50% of the same quarter in 2019
- For 2021, gross receipts fall below 20% of the same quarter in 2019
If you think the above criteria could apply to your organization, please reach out to your local tax professional to help you maximize the benefits for your specific situation.
If you are in need of a referral for a tax professional, we recommend you filter through our MEDCO business partners here.