Employee Retention Credit

Everything you need to know about the Employee Retention Credit (ERC). 

ERC Overview

Employee Retention Credit Overview

Max Employee Retention Credit Per Employee

33K

Employee Retention Credit Valid Thru

12/31

Employee Retention Credit Repayment Amount

$0

Employee Retention Credit Quicklinks

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William G.

PayNortheast Customer

"Choosing to have PayNortheast process our Employee Retention Credit was the best decision I made. They got my business 1.2 million dollars!"

What is the ERC

What is the Employee Retention Credit?

The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 70% of the qualified wages an eligible employer pays to employees between January 1, 2021 and December 31, 2021, and 50% on wages paid after March 12, 2020, and before January 1, 2021. Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer's employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS. Unlike Paycheck Protection Program (PPP) loans and other small business relief options, businesses of all sizes are eligible to receive the Employee Retention Credit. And because the ERC is not a loan, recipients will never need to repay or seek forgiveness for ERC funds.

 

ERC eligibility

Who can claim the Employee Retention Credit?

To be eligible for the Employee Retention Credit, an employer must meet one of the following conditions:

  • [2020 ERC eligibility] Gross receipts for a calendar quarter are <50% compared to the prior year, in 2019. Employers can claim the credit during the first quarter that they see this decline, until it recovers to 80% or more of the gross receipts for the same calendar quarter in the prior year.

  • [2021 ERC eligiblity] Gross receipts for a calendar quarter are <20% compared to the prior year. Employers can claim the credit during the first quarter that they see this decline, until it recovers to 80% or more of the gross receipts for the same calendar quarter in the prior year. With the update, you can also now use prior quarter gross receipts to determine eligibility.

[UPDATE MAR 2021] If employers were not in existence in the equivalent calendar quarter in calendar year 2019, they may substitute ‘2020’ for ‘2019.’


[UPDATE MAR 2021] Seasonal employers may substitute ‘the average quarterly wages paid by the employer in calendar year 2019’ instead of using the equivalent quarter in 2019. 


[UPDATE MAR 2021] New: $50,000 quarterly credit cap for businesses defined as a “Recovery Startup Business.” 

  • These are businesses that started operations after February 15, 2020, with no more than $1 million in annual gross receipts.

 

ERC qualified wages

Employee Retention Credit Qualified Wages

Qualifying wages are the wages and compensations employers pay to employees during the time period. This includes qualified health plan expenses associated with said wages.

Another factor that determines qualified wages is the number of full-time employees you had in 2019.

In 2020, employers with fewer than 100 full-time employees in 2019 could claim the ERC on all wages paid to employees during a qualifying period (e.g., shutdown period).

The Act increased the small employer threshold from 100 full-time employees to 500.

 

Employers with up to 500 full-time employees in 2019 can claim the ERC for 2021 on wages paid for working or non-working periods.

An employer with fewer than 500 employees is eligible for the credit, even if employees are working. Businesses with 500 or fewer employees can also advance the credit anytime during the quarter based on 70% of the average quarterly payroll for the same quarter in 2019.

Employers with more than 500 full-time employees in 2019 may claim the credit only for wages paid to an employee while the employee is not performing services for the employer.

In accordance with section 4980H(c)(4) of the Code and as provided by Notice 2021-20, the term “full-time employee” for purposes of the employee retention credit means an employee who, with respect to any calendar month in 2019, had an average of at least 30 hours of service per week or 130 hours of service in the month (130 hours of service in a month is treated as the monthly equivalent of at least 30 hours of service per week).