What is it? The Employee Retention Credit is a fully refundable tax credit equal to 50% of qualified wages that Eligible Employers pay their employees.
What are the effective dates? The Credit applies to wages paid after March 12, 2020 and before January 1, 2021.
What is the Maximum credit available? An eligible employer can take a maximum of $5,000 per employee for qualified wages ((as defined in section 3121(a) of the Internal Revenue Code (the “Code”)) and compensation (as defined in section 3231(e) of the Code)) paid.
Are allocable qualified health plan expenses included in the qualified wage calculation? Yes
What determines an “Eligible Employer”? For the purposes of the Employee Retention Credit, an eligible employer is one that carry on a trade or business during calendar year 202, including tax-exempt organizations that either:
- Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
- Experience a significant decline in gross receipts during the calendar quarter.
Learn more about employer eligibility on the irs.gov site.
How is a “significant decline in gross receipts” calculated?
Step 1: Significant decline begins with the first calendar quarter in when an employer’s gross receipts are less than 50% of the same calendar quarter in 2019.
Step 2: The significant decline in gross receipts ends with the first calendar quarter that follows the first calendar quarter in which the employer’s 2020 quarterly gross receipts are greater than 80 percent of its gross receipts for the same calendar quarter in 2019, or with the first calendar quarter of 2021.
Are eligible employers able to receive both the ERC and PPP loan? No
See the full list of FAQ’s on the COVID-19 Employee Retention Credits FAQ Page.
All above information came from the IRS website.