Stay updated on all areas of tax filings and business processes affected by COVID-19

Learn more

Does Your Business Qualify for the Employee Retention Credit?

Who is eligible for the credit?

  1. Your operations were fully or partially suspended due to a COVID-19-reIated order from a governmental authority limiting travel, business and meetings, (must be more than a "nominal effect" on business operations) or

  2. You had a reduction in gross receipts compared to 2019, typically 50% or more for 2020 and 20% for 2021.

How much is the credit?

For 2020: The maximum ERC credit is $5,000 per employee. ($10,000 per employee maximum X 50% credit)

For 2021: The maximum ERC credit is $7,000 per employee, per quarter for the first three quarters of the year. ($10,000 per employee, per quarter maximum X 70% credit) The total maximum ERC credit is $21,000 per employee for 2021.

Employee Retention Credit (ERC) example

A restaurant in Massachusetts has 15 employees, including the owner and spouse. The restaurant received a $100,000 PPP loan in 2020 which was fully forgiven. The restaurants business operations were "partially suspended" by MA government restrictions on indoor dining and capacity from March 23, 2020 to May 28, 2021. The restaurant is eligible for the ERC for 3/23/20 - 5/28/21.

Their 2020 ERC is calculated as follows

  • $300,000 total payroll for 3/23/20-12/31/20

  • -100,000 payroll used for PPP loan forgiveness

  • -60,000 owner and spouse payroll (certain owners and relatives are not eligible for ERC)

  • -20,000 wages more than $10,000 per employee for 2020

  • $120,000 net eligible wages.

$60,000 ERC credit (50% of eligible wages)

The 2021 credit is even more generous than 2020. The eligible wages are up to $10,000 per quarter instead of $10,000 per year and the credit is 70% instead of 50%. This same restaurant could be eligible for an ERC of approximately $80,000-100,000 for 2021.

There are many rules and regulations related to the ERC and PPP. Call us today to find out how we can help you maximize this valuable tax credit.