In response to the economic downturn caused by the COVID-19 pandemic, the U.S. government introduced the Employee Retention Credit (ERC), a refundable federal tax credit. Unlike a loan, this credit does not require repayment and is aimed at encouraging businesses to sustain their workforce. Available for the tax years 2020 and 2021, the ERC offered varying credit percentages with a maximum of $5,000 per employee in 2020 and up to $28,000 per employee in 2021 for eligible businesses.
The ERC played a vital role in assisting businesses in navigating the economic fallout from the pandemic. It provided the much-needed monetary cushion to offset revenue loss and keep businesses afloat. The 2021 ERC saw a special provision for new entities known as Recovery Startup Businesses, further expanding the program’s reach.
Qualifying for the ERC was not limited to businesses experiencing reduced gross receipts. The scope was broad, encapsulating U.S. organizations from diverse industries, irrespective of size, and those impacted by government-imposed restrictions. Specific qualifying criteria were also established to ascertain the magnitude and period of such impacts.
With an array of qualifying factors like wages, which include cash payments and employer-provided healthcare costs, and the number of full-time employees in 2019, the ERC was flexible yet robust. Interestingly, businesses that availed the Paycheck Protection Program (PPP) loans were not excluded from this relief measure.In 2023, businesses can claim the Employee Retention Credit by amending their tax filings, a process that typically takes the IRS 4-10 months to process. To ensure correct and efficient filing, businesses can turn to expert groups like Credit League, equipped with a proficient team of attorneys and CPAs, dedicated to assisting businesses in maximizing their ERC benefits.