How Businesses Acquire the Employee Retention Credit

The Employee Retention Credit (ERC) is a refundable federal tax credit aimed at encouraging employers to retain their employees during the COVID-19 pandemic. Unlike a loan, it does not require repayment. The credit is available for tax years 2020 and 2021. In 2020, employers could claim 50% of up to $10,000 in wages per employee, totaling up to $5,000 per employee. In 2021, the credit increased to 70% of up to $10,000 in wages per employee per quarter, amounting to $7000 per employee for the year.

The ERC program officially ended in 2021, but businesses can still file to receive funds. To qualify for ERC, businesses must have experienced a significant decline in gross receipts in 2020 or 2021 due to the pandemic. Various organizations including nonprofits, colleges, universities, along with industries such as hospitality, retail, and real estate may be eligible. Businesses that faced government-imposed suspensions, supply chain disruptions, reduced operations, or workforce limitations due to COVID-19 may also qualify.

ERC requires qualifying wages, including cash payments and a portion of employer-provided healthcare costs. The credit amount depends on the number of employees and whether they worked during the quarter. To navigate the ERC process, businesses can seek assistance from qualified experts like Credit League. They offer consultations, help with documentation preparation, complete ERC filings, and maximize returns. The IRS typically takes 4-10 months to process ERC claims and issue checks.