{"id":4986,"date":"2024-02-22T12:51:00","date_gmt":"2024-02-22T18:51:00","guid":{"rendered":"https:\/\/web.blockadvisors.com\/?p=4986"},"modified":"2024-04-19T07:58:48","modified_gmt":"2024-04-19T13:58:48","slug":"employee-retention-tax-credit","status":"publish","type":"post","link":"https:\/\/www.blockadvisors.com\/resource-center\/small-business-tax-prep\/employee-retention-tax-credit\/","title":{"rendered":"Employee retention credits: Guide to the ERC tax credit program"},"content":{"rendered":"\n

Editor\u2019s Note:<\/em><\/strong> The article below was initially published in April 2020 to explain Employee Retention Credits. It has been updated to include additional information on changes made to the ERC tax credit and ERC program since the original roll-out. <\/em><\/p>\n\n\n\n

The coronavirus pandemic took a major toll on American businesses. Nationwide closures and dwindling sales had a devastating effect on the bottom lines of small businesses. There were far-reaching impacts for companies of all sizes, especially pertaining to employees and investment. Many businesses had to make tough choices to keep doors open. Even with significant changes, many organizations were forced to close.<\/p>\n\n\n

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Thankfully, in late March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act<\/a> (CARES Act) to help those financially struggling due to the coronavirus. The bill defined four important pillars for small business owners:<\/p>\n\n\n\n

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  1. Paycheck Protection Program<\/a><\/li>\n\n\n\n
  2. Employee Retention Tax Credit<\/li>\n\n\n\n
  3. Payroll Tax Postponement<\/a><\/li>\n\n\n\n
  4. Economic Injury Disaster Loans<\/a><\/li>\n<\/ol>\n\n\n\n

    Each program was enacted to stimulate the American economy and help small business owners in economic need. (Further reading: 2020-21 Small Business Taxes and Stimulus Relief<\/a>) <\/p>\n\n\n\n

    This post will cover details surrounding the Employee Retention Credit, or ERC tax credit. Keep reading to hear details about what it is, why it\u2019s important, and other key guidance surrounding the credit now!<\/p>\n\n\n\n

    What are Employee Retention Credits (ERC Program)?<\/strong><\/h2>\n\n\n\n

    Employee Retention Credits (ERC program) worked like a payroll tax<\/a> credit. As the name implies, the Employee Retention Tax Credit (ERTC) was a refundable tax credit that helped small businesses keep employees on their payroll.<\/p>\n\n\n\n

    From January 1, 2021, through September 30, 2021, most small business owners with a decline in gross receipts of 20% (previously 50%) year over year could claim a payroll tax credit for 70% of qualified wages up to $10,000 per employee per quarter (previously you could claim 50% for the same amount per employee per year), including certain health benefits, paid to an eligible employee. Previously, the deadline was June 30, 2021.<\/p>\n\n\n\n

    What is the purpose of the ERC tax credit?<\/strong><\/h2>\n\n\n\n

    The ERC program helped small business owners keep their employees on the payroll if the company stopped doing business or was significantly financially affected by the Coronavirus pandemic. (Read more: Small business disaster relief & recovery<\/a>)<\/p>\n\n\n\n

    Employee retention credits continue to be refundable to eligible employers with insufficient tax liability.<\/p>\n\n\n\n

    ERC tax credit eligibility: What are the ERC program qualifications?<\/strong><\/h2>\n\n\n\n

    Employee Retention Credits are need-based. If your business took a hit financially due to the coronavirus, it may qualify. To be more specific, your business qualifies for this credit for an eligible quarter in 2020 or 2021 if:<\/p>\n\n\n\n