The Employee Retention Credit (ERC)

The Employee Retention Credit

The Employee Retention Credit originally included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The American Rescue Plan (ARP) Act of March 2021 changed the rules and now PPP and EIDL loan recipients can now qualify for the ERC.

What you need to know

    • The employee retention credit is available for qualifying businesses, and non-profit organizations. You can get up to $26,000 per eligible employee. And its refundable
    • The credit is based on qualifying wages and certain health expenses paid to qualifying employees from March 12, 2020 and before October 1st 2021.
    • 2020: You can get up a credit of up to $5,000 per qualifying employee (50% of the first $10,000 qualifying wages per eligible employee)
    • 2021: you can get up a credit of up to $7,000 per quarter per qualifying employee. For each of the first three quarter of 2021. (70% of the first $10,000 qualifying wages per eligible employee) That can be up to $21,000 per employee.
    • The credit is available only to eligible small business owners:
      • Based by the number of Full Time Employees in 2019
      • 2020: Under 100 Full Time Employees
      • 2021: Under 500 Full Time Employees

Two ways to qualify

Business Operations were stopped/reduced due to a government mandate


Gross sales were reduced:

  • In 2020 gross sales reduced by 50% vs 2019
  • In 2021 gross sales reduced by 20% vs 2019
  • The analysis is done on a quarterly basis

If your business started operations after February 15th 2020. Your business may qualify for the Employee Retention Credit if it qualify as a Recovery Business Startup.

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Frequently Asked Questions (Q&A)

Q: If I received the PPP loans am I still eligible to receive the Employee Retention Credit?
A: Yes, you may qualify, however, you cannot double-dip. Any PPP funds towards payroll, will not qualify as eligible for Employee Retention Credit purposes

Q: what if I received the EIDL loan?
A: Yes, you may qualify for the ERC.

Q: What’s the difference between PPP Loan EIDL Loans and Employee Retention Credit?
A: The ERC does not have to be forgiven or has to be paid back. There are no restrictions on how you spend your money.

Q: Do 1099 contractors qualify as employees?
A: NO. Qualifying employees must be W2 employees

Q: If my business gets the credit, will I have to amend my business/personal tax returns?

  • A: If you already filed your 2020 and 2021 tax returns. Yes.
  • A: If you have not filed your returns, you won’t have to as long as you factor in the credit info.

Q: Is there an expiration date on these credits?

  • A: For 2020: The credit does not close until 04/15/2024
  • A: For 2021: The credit does not close until 04/15/2025

Q: What’s the definition of the Full Time Employee?
A: Employee must work 32 hrs a week or 130 hours per month.