The Employee Retention Credit (ERC) is a tax credit introduced by the U.S. government in response to the COVID-19 pandemic. It is designed to encourage employers to retain their employees during challenging economic conditions. The ERC is a refundable credit, which means that eligible employers can receive a refund even if they have no tax liability.
To qualify for the ERC, there are four primary criteria that businesses need to meet. Firstly, your business must have experienced a decline in revenue due to COVID-19 in both 2020 and 2021. Secondly, your business must operate within the United States, regardless of its size. Thirdly, your business must have undergone a full or partial shutdown as mandated by authorities, resulting in limitations on business hours, reduced services, or the implementation of social distancing measures. Lastly, your business may also qualify if it meets the requirements of a recovery startup business during the third or fourth quarter of 2021.
Credit amounts vary based on whether an employer had more or less than 100 or 500 average full-time employees. If you are unsure whether you qualify for ERC, you can contact experts such as Credit League for assistance.