Calvetti Ferguson hosted a webinar focused on the employee retention credit (ERC), a valuable tax credit that helps businesses that kept their employees on payroll during the COVID-19 pandemic. Tax incentives partner Bryan Valencia and tax incentives director Tyler Forner discussed what the ERC is, which employers can qualify for it, how eligible employers can claim the ERC, and the benefits of claiming the tax credit. Below is a synopsis of the material covered during the webinar.
What is the ERC?
The ERC is a refundable payroll tax credit for businesses that continue to pay wages and health plan expenses, and it is available to employers who meet specific criteria. It was enacted in the CARES Act of 2020 for March 13, 2020, through December 31, 2020. It was then extended in the American Rescue Plan Act of 2021 to December 31, 2021.
How can eligible employers claim the ERC?
Eligible employers can claim the ERC on an adjusted employment tax return between March 13, 2020, to December 31, 2021 (Form 941-X). However, they must meet at least one of the following criteria:
1. The business had a full or partial suspension of operations due to a government order
- Order can either be made from a federal, state, or local government or supply chain disruption
2. The business had a significant decline in gross receipts
- For the year 2020, gross receipts for a quarter experience at least a 50% decline for the same calendar quarter in 2019
- For the year 2021, gross receipts for a quarter experience at least a 20% decline for the same calendar quarter in 2019
3. The business is a recovery startup
- This criterion is only available for the third and fourth calendar quarters of 2021 only
The benefits of claiming the ERC
The benefits of claiming the ERC differ from 2020 to 2021. For the year 2020, eligible employers can receive a maximum ERC of $5,000 for the entire year, or 50 percent of qualified wages. The credit gets calculated and refunded quarterly. For the year 2021, the decrease in revenue decline makes it easier to claim the credit for a maximum ERC of $7,000 per quarter or 70% of qualified wages. Cumulatively, this would be up to $26,000 per employee. Startups can potentially receive a maximum ERC of $100,000 for the third and fourth quarters of 2021.
Below are examples of industries Calvetti Ferguson has worked with to claim the ERC.
- Manufacturers
- Distribution companies
- Restaurants
- Barbershops
- Medical practices
- Construction companies
- And more
Watch the full recording of the employee retention credit (ERC) webinar on our YouTube channel or visit this webpage to learn more about this tax credit.
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