The Employee Retention Tax Credit is considered one of our Hiring Incentives and the most current version was signed into law as a result of the COVID-19 crisis with the CARES Act in 2020.  However, there is a previous version of the Employee Retention Tax Credit that focuses on Disaster Relief.  For purposes of clarifying the differences between the two we call the current version COVID ERC or C-ERC and the previous version Disaster ERC or D-ERC.


COVID-ERC

The Coronavirus Aid, Relief, and Economic Security (CARES) Act created a new employee retention tax credit for employers who closed, partially or fully, and experienced significant revenue losses as a result of COVID-19.


Who Is Eligible:

Private employers, including non-profits, carrying on a trade or business in 2020 that:

  • Have operations partially or fully suspended as a result of orders from a governmental authority due to COVID-19, or
  • Experience a decline in gross receipts by more than 50% in a quarter compared to the same quarter in 2019 (eligibility ends when gross receipts in a quarter exceed 80% of the same 2019 quarter)


Who Is Eligible:

Private employers, including non-profits, carrying on a trade or business in 2020 or 2021 that:

  • Have operations partially or fully suspended as a result of orders from a governmental authority due to COVID-19, or
  • Experience a decline in gross receipts by more than 20% in a quarter compared to the same quarter in 2019 


How Much Is The Tax Credit for 2020?

C-ERC is a 70% tax credit for the first $10,000 of earnings paid each quarter between January 1, 2021 and June 30, 2021 per eligible employee.  This amount can include the employer portion of health benefits.  Basically, for every eligible employee who earned $20,000 or more during this time period would provide the employer with a $14,000 tax credit.


How Is The Credit Taken?

The COVID ERC is applied against the employer portion of payroll taxes.  


Can PPP and ERC be taken by the same employer?

As of December 21, 2020 and the passing of the Consolidated Appropriations Act of 2021, employers can take both PPP and ERC. Congress will allow employers to claim both, but not for the same dollars of payroll costs.  They can be stacked for the highest benefit to the client.


DISASTER-ERC

The Further Consolidated Appropriations Act signed on December 20, 2019 included an extension to the existing Employee Retention Credit for employers affected by qualified disasters that occurred during 2018 and 2019.  ERC or ERTC is a tax credit that has been around for years, specifically focused on areas of disaster.


Who Is Eligible?

Employers who operated in a qualified disaster zone and become inoperable due to the disaster and they continued to pay or incur wages for eligible employees.  Currently (as of June 2, 2020) these areas were predefined by President Trump and include 282 counties in the following states:


Alabama, Alaska, Arkansas, California, Florida, Georgia, Hawaii, Indiana, Iowa, Mississippi, Missouri, Nebraska, North Carolina, Ohio, Oklahoma, South Carolina, South Dakota, Texas, and Wisconsin.


How Much Is The Tax Credit?

D-ERC is a 40% tax credit for up to $6,000 of earnings paid to each eligible employee(making the maximum credit $2,400 per eligible employee).  


How Is The Credit Taken?

The Disaster ERC is a Federal income tax credit and should be filed with the employers tax return.


Summary

Most clients want to know "what do I qualify for".  Legislation related to Hiring Incentives is constantly changing due to the COVID-19 crisis.  We stay informed and educated about these constant changes and ensure that our clients get the highest amount on tax incentives possible.  The quickest way to know what you or your client would qualify for is to send the client to your GMG.Me page.  See here: How Does My Client Get Signed Up for ERC?