How ERC Tax Credit Can Help Your Business During the Pandemic

The Employee Retention Credit (ERC) is a tax credit designed to provide financial relief to eligible employers who have experienced hardships due to the COVID-19 pandemic. The credit was first introduced under the CARES Act in 2020 and has since been extended and expanded under subsequent legislation. The ERC provides eligible employers with a tax credit of up to 70% of qualified wages paid to employees during a specific period.

The benefit of the ERC is that it incentivizes eligible employers to retain their employees, even during difficult financial times. The tax credit can be used to offset payroll taxes or claimed as a refund, which means that employers can receive a check from the government for any excess credit not used to offset payroll taxes.

To be eligible for the ERC, an employer must meet specific criteria, including experiencing a significant decline in gross receipts or a full or partial suspension of operations due to government orders related to COVID-19. Employers can claim the ERC for wages paid to eligible employees during a particular period, which varies depending on the tax credit extension.

For example, under the Consolidated Appropriations Act of 2021, eligible employers could claim the ERC for qualified wages paid between March 13, 2020, and December 31, 2020. In contrast, under the American Rescue Plan Act of 2021, eligible employers could claim the ERC for qualified wages paid between January 1, 2021, and December 31, 2021.

Overall, the ERC has been a critical tool for eligible employers who have struggled to keep their businesses afloat during the COVID-19 pandemic. The credit provides financial relief to eligible employers while incentivizing them to retain their employees. Employers who believe they may be eligible for the ERC should consult with their tax advisors to determine their eligibility and claim the credit.

I recommend that you click on this link to find information on the Employee Retention Credit, including information on how to calculate the credit and how to claim it on your tax return. To begin your ERC or have questions click below

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