EMPLOYEE RETENTION CREDIT:

Note from Editor: In response to multiple requests by NSTP members, in late October we will be offering a live-streaming webinar reviewing the ERC requirements, calculations and preparation of payroll tax returns. Additional information will be available shortly.

The Employee Retention Credit (ERC), sometimes called the Employee Retention Tax Credit, or ERTC, is a refundable tax credit for businesses and tax-exempt entities that had employees and were affected by the COVID-19 pandemic. The ERC is a complex credit that requires careful review before applying. The requirements are different depending on the time period for which you claim the credit.

The IRS has alerted businesses and tax-exempt organizations of warning signs for misleading scams involving the ERC. The IRS recently released ERC FAQs that provide general information about eligibility, claiming the credit, recordkeeping and more.

Eligibility highlights

The credit is available to eligible employers that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022. Eligibility and credit amount vary depending on when the business impacts occurred. The ERC is not available to individuals.

Generally, businesses and tax-exempt organizations that qualify are those that:

• Were shut down by a government order due to the COVID-19 pandemic during 2020 or the first three calendar quarters of 2021, or
• Experienced the required decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters of 2021, or
• Qualified as a recovery startup business for the third or fourth quarters of 2021
• Eligible employers must have paid qualified wages to claim the credit.