Refundable Credit (This means that you can get a refund check from the government even if you did not pay taxes last year.)
How To Qualify
Full Year, 2020:
- The company must show more than a 50% decline in quarterly receipts in any part of the business as compared to the same quarter in 2019.
- The maximum credit is $5,000 per employee per year.
- This applies only to full-time employees (30 or more hours per week).
How You Can Qualify in the First Half of 2021:
- The company must experience a reduction of at least 20% in the first half of 2021 as compared to the first half of 2019.
- The employer’s share of social security tax is equal to 70% of employee wages paid and health care expenses.
- The maximum credit is $7,000 per employee per quarter.
How You Can Qualify in the Second Half of 2021:
- Same eligibility rules as the first half
- Refundable credit of $7,000 per employee per quarter ($28,000 per year)
Caveats
- Employer cannot claim the ERC on wages it uses to receive PPP loan forgiveness
- Small businesses can request advanced payments on the credit from the IRS
- Small business: defined as 100 employees or less in 2020
- Small business: defined as 500 employees or less in 2021
- Can claim wages for employees that are actively working or not actively working
- Large business: defined as greater than 500 employees
- Can only declare wages for employees not providing services
- Applies only to full-time employees (30 or more hours per week)