What is the Employee Retention Tax Credit (“ERC”)?

The ERC program was enacted when the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) was signed into law on March 27, 2020, The ERC allows eligible employers to receive payroll refunds of up to $26,000 per employee for the 2020-2021 tax periods.

Which companies are eligible for the ERC?

Companies are eligible for the ERC if they experienced either of the following:

1. The business operations were impacted by a government order during the COVID-19 period. This business interruption could include reduced hours, inability to work with suppliers or limitations on services provided to customers.

2. Experienced a significant decline in gross receipts defined as a 50% reduction in gross receipts in 2020 as compared to 2019. For 2021, the significant reduction is defined as a more than 20% decline in gross receipts versus the same quarter of 2019,. 

What wages qualify for the ERC?

You can claim a 50% credit on wages or eligible health care expenses up to $10,000 for 2020. In 2021, a 70% credit is available on eligible wages up to $10,000 for the first three quarters of 2021. This equates to a credit value of up to $5,000 per employee in 2020 and up to $21,000 per employee in 2021. 

I already filed my 2020 & 2021 payroll forms, is it too late to apply for the ERC refund? 

No, companies are entitled to submit amended filings for the 2020 period until April 15th of 2024 and for the 2021 period until April 15th of 2025 

Will I have to pay the ERC back?

No, these refunds do not need to be paid back.

How is this different from the Payroll Protection Program (“PPP”) Program?

The PPP program, also enacted in the CARES act, was administered by the Small Business Administration as a loan forgiveness program to financially assist impacted companies during the COVID-19 period. The ERC was administered by the IRS.  Initially, companies could participate in the PPP or ERC programs, but not both. However, those rules were relaxed and changed when The American Rescue Plan Act of 2021 was passed in March of 2021. This act allowed companies to receive both PPP and ERC and the ERC could be claimed retroactively to 2020 for these companies.

Will the refund be subject to audit by the IRS?

Yes, the refund will be subject to IRS audit, normally the audit period lasts two years after the refund claim is filed. Realiser can assist in your audit defense or facilitate the acquisition or risk coverage for your ERC claim.