Frequently Asked Questions about the Employee Retention Tax Credit

1. What is the Employee Retention Tax Credit (ERTC)?

The Employee Retention Tax Credit is a tax incentive introduced by the U.S. government to encourage businesses to retain their employees during challenging economic times, such as the COVID-19 pandemic.

2. How does the ERTC work?

The ERTC allows eligible employers to claim a tax credit for a percentage of qualified wages paid to their employees. The credit is equal to 50% of qualified wages up to a maximum of $10,000 per employee per year. This means that the maximum credit per employee is $5,000.

3. Who is eligible for the ERTC?

Employers, including tax-exempt organizations, are eligible for the ERTC if they meet one of the following criteria:

• Their operation was fully or partially suspended due to a government order related to COVID-19.
• They experienced a significant decline in gross receipts. For 2020, this decline means the gross receipts of a quarter are less than 50% of the same quarter in 2019. For 2021, the decline is when gross receipts are less than 80% of the same quarter in 2019.

4. Are there any limits on the number of employees for eligibility?

No, there are no limits on the number of employees for eligibility. Employers of all sizes can claim the ERTC as long as they meet the eligibility criteria.

5. Can eligible employers claim the ERTC for all employees?

Yes, eligible employers can claim the ERTC for all employees, including full-time, part-time, and seasonal employees. However, the credit is only available for employees who are not working due to the reasons mentioned in question 3.

6. Can employers claim the ERTC for wages that are already covered by other COVID-19 relief programs?

No, employers cannot claim the ERTC for wages that are already covered by other COVID-19 relief programs, such as the Paycheck Protection Program (PPP). If an employer has received a PPP loan, they cannot claim the ERTC for wages paid with the loan proceeds.

7. How is the ERTC claimed?

Employers can claim the ERTC by reporting it on their federal employment tax return, usually on Form 941. The credit can be used to offset the employer's share of social security tax liability. If the credit exceeds the tax liability, the employer can request a refund.

8. Is the ERTC available for both 2020 and 2021?

Yes, the ERTC is available for both 2020 and 2021. However, there are some differences in the eligibility criteria and calculation of the credit amount between the two years. It is advisable to consult with a tax professional or refer to the official IRS guidelines for specific details.

9. Can an employer claim the ERTC retroactively?

Yes, an employer can claim the ERTC retroactively. If an employer was eligible for the credit in a previous quarter but did not claim it, they can file an amended employment tax return or make an adjustment on a subsequent return to claim the credit.

10. Where can I find more information about the ERTC?

For more information about the Employee Retention Tax Credit, you can visit the official website of the Internal Revenue Service (IRS) or consult with a tax professional who can provide guidance based on your specific situation.