Need help with your Employee Retention Credit?
What is the Employee Retention Credit?
The Employee Retention Tax Credit (ERC) is a refundable tax credit designed to reward business owners for retaining employees throughout the COVID-19 pandemic. The Employee Retention Credit is available to both small- and mid-sized businesses. It was signed into law on March 27, 2020, as part of the CARES Act, and was significantly expanded in 2021.
Business owners impacted by COVID-19 can claim up to $5,000 in refundable tax credits for each employee on their payroll in 2020 and up to a $7,000 credit per quarter (excluding Q4) for each employee in 2021.
Which Businesses Qualify for an ERTC?
Eligible Employers for the purposes of the Employee Retention Credit are employers that carry on a trade or business during calendar year 2020, including tax-exempt organizations, that either:
- Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
- Experience a significant decline in gross receipts during the calendar quarter.
An employer looking to qualify for an ERTC by showing that its business was fully or partially suspended by a COVID-19 related government order should obtain and maintain documentation of the specific government orders.
A significant decline in gross receipts begins with the first calendar quarter in 2020 in which an employer’s gross receipts are less than 50 percent of its gross receipts for the same calendar quarter in 2019.
The significant decline in gross receipts ends with the first calendar quarter that follows the first calendar quarter in which the employer’s 2020 quarterly gross receipts are greater than 80 percent of its gross receipts for the same calendar quarter in 2019, or with the first calendar quarter of 2021.
For 2021 a significant decline in gross receipts is defineds as a 20% reduction when compared to the same quarter of 2019.
*There are more complicated rules/methods that may apply, such as the subsequent quarter rule and alternative method which needs to be analyzed by one of our payroll professionals.
Recovery Startup Eligibility
Some business may qualify for up to $50,000 per quarter for Quarters 3 and 4 of 2021 under the Recovery Startup provision which doesn't require the sales or shutdown test if you meet the following criteria:
How Can We Help?
Liberty Payroll & HR helps by generating the credits for you and building a case file to support your claim, taking all the guess work out of the process. We know the rules and laws when it comes to Employee Retention Credits, which makes the process a lot smoother than trying it on your own.
Speak to a professional at Liberty Payroll & HR today to see if your company qualifies for an Employee Retention Credit by calling us at (973) 690-5200.
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