What is ERC?
The Employee Retention Credit, or ERC, is a tax credit designed to incentivize employers to keep employees on their payroll, rather than laying them off or furloughing them due to unforeseeable circumstances such as the COVID-19 pandemic. The credit was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 and has since been expanded by subsequent legislation.
The goal of the ERC is simple: to help employers retain their workforce during tough economic times. The credit provides a refundable tax credit of up to $5,000 per employee per quarter, or 50% of qualified wages, for employers who meet certain eligibility requirements.
How do I qualify?
To qualify for the ERC, employers must meet one of two criteria:
- Businesses that experienced a significant decline in gross receipts: Employers that saw a decline in gross receipts of 50% or more in a calendar quarter compared to the same quarter in the previous year are eligible for the credit.
- Businesses that were fully or partially suspended due to government orders: Employers that were forced to shut down fully or partially due to government orders related to COVID-19 are also eligible for the credit.
Qualifying wages for the ERC include both cash and non-cash compensation, such as health benefits and retirement plan contributions, as well as salaries and wages subject to federal employment taxes. However, qualified wages must be paid between March 13, 2020, and December 31, 2021.
Many small to medium-sized businesses have been hit hard by the pandemic, and the ERC offers an opportunity for relief during these challenging times. However, navigating the ERC can be complicated, and it’s important to have a qualified CPA or tax attorney to assist with the process. This is where ClearERC comes in – we are here to help guide you through the ERC application process and ensure that you maximize your tax credits.
In summary, the ERC is a tax credit designed to help employers keep their employees during tough economic times. To qualify, employers must meet certain eligibility requirements, including experiencing a significant decline in gross receipts or being fully or partially suspended due to government orders. At ClearERC, we are here to assist businesses and their accountants in filing their ERC applications to maximize their tax credits. Contact us today to see how we can help you navigate the ERC and take advantage of this valuable tax credit.