The Employee Retention Credit is a refundable credit against payroll taxes in 2020 and 2021 that can be very lucrative for businesses that qualify. The maximum credit for 2020 is $5,000 per eligible employee and for 2021 is $7,000 per quarter per eligible employee.
We have created Decision Trees in order to help you assess whether your businesses may be eligible for these credits in 2020 and/or 2021.
Decision Tree Downloads
- 2020 Employee Retention Credit (ERC) Decision Tree
- 2021 Employee Retention Credit (ERC) Decision Tree
As you will see in the decision trees, a significant qualifying metric is how many full-time employees your business had in 2019. The IRS has provided this guidance on how this metric is computed:
49. How does an Eligible Employer identify the average number of full-time employees employed during 2019?
The term “full-time employee” means an employee who, with respect to any calendar month in 2019, had an average of at least 30 hours of service per week or 130 hours of service in the month (130 hours of service in a month is treated as the monthly equivalent of at least 30 hours of service per week), as determined in accordance with section 4980H of the Internal Revenue Code. An employer that operated its business for the entire 2019 calendar year determines the number of its full-time employees by taking the sum of the number of full-time employees in each calendar month in 2019 and dividing that number by 12.
An employer that started its business operations during 2019 determines the number of its full-time employees by taking the sum of the number of full-time employees in each full calendar month in 2019 in which the employer operated its business and dividing by that number of months.
An employer that started its business operations during 2020 determines the number of its full-time employees by taking the sum of the number of full-time employees in each full calendar month in 2020 in which the employer operated its business and dividing by that number of months, consistent with the approach discussed above for employers that began business operations during 2019.
Source: COVID-19-Related Employee Retention Credits: Determining Qualified Wages FAQs | Internal Revenue Service (irs.gov)
Originally, when the CARES Act was issued, the ERC was not available to businesses that received a Paycheck Protection Program (PPP) loan. However, this restriction was lifted by Congress in December 2020. The credit can be claimed retroactively through the filing of amended payroll tax reporting forms (941).
This webpage is a very high-level summary of the ERC. Here’s a thorough analysis of the ERC.
Contact Our ERC Consulting Team
Our team of specialists can help you through the process. If you believe your business may be eligible based on the results of the decision trees, complete the following form and we will have one of our specialists reach out to you.