The Employee Retention Credit (“ERC”) is a program under the Coronavirus Aid, Relief, and Economic Security Act that provides certain businesses with a refundable tax credit on paid employee wages.  The ERC program was enacted to incentivize employers to keep employees on payroll.  Certain employers who received funding under the Paycheck Protection Program (“PPP”) are also eligible for ERC.

While businesses can no longer pay wages to claim ERC, the Internal Revenue Service (“IRS”) has issued guidance stating that a business can look back retroactively at wages paid during the pandemic to determine whether they are entitled to ERC.  If a business was qualified, it can amend its Quarterly Form(s) 941 to claim the ERC retroactively.

In order to qualify for the ERC, certain qualifications must be met based on each applicable calendar quarter after March 12, 2020.  The qualifications are based on one of two tests:

  1. The employer’s business was fully or partially suspended, or the business had to reduce business hours because of government order; or
  2. The employer had a significant decline in gross receipts based on a certain threshold set by the IRS, even if such decline is not related to the coronavirus pandemic.

If qualified, a business may be entitled up to $5,000 per employee in 2020, and $7,000 per employee for each eligible quarter in 2021.

Even businesses who have not experienced a decline in gross revenue as a result of the coronavirus pandemic or who did not qualify for a PPP loan may qualify for ERC.  If you have any questions about your eligibility, reach out to David R. Mayer, Seth J. Moen, or Michael L. Rickert to assist you in determining whether you are eligible for ERC.

The information provided is intended to be a general guideline and should not be considered professional advice. Every client’s unique circumstances will be considered and may vary the guidelines described above. The Business and Corporate attorneys at Dvorak Law Group can assist with determining whether your company qualifies for ERC.  Please contact Dvorak Law Group for specific questions and recommendations. We look forward to the opportunity to assist you.