What Is Required to Receive an ERC Tax Credit?

There Are Two Different ERC Programs, Each With Their Own Rules.

​

ERC Qualifications 

Employers are eligible to claim the ERC for the calendar year 2020 if they operated a trade or business during the calendar year and experienced either:

1. A full or partial suspension of the operation of their trade or business during any calendar quarter on account of a governmental order limiting commerce, travel or group meetings due to COVID-19; or

2. A significant decline in gross receipts by more than 50% when compared to the same quarter in the prior year.

The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, and the maximum credit for an employer who qualifies for the ERC is 50% of the first $10,000 in qualified wages, i.e., up to $5,000 per employee.

For an employer who on average had more than 100 full-time employees in 2019, qualified wages are generally those wages paid to employees not providing services because operations were fully or partially suspended or due to the decline in gross receipts.

For an employer who on average had 100 or fewer full-time employees in 2019, qualified wages are generally those wages paid to all employees during a period that operations were fully or partially suspended or during the quarter that the employer had a decline in gross receipts, regardless of whether the employees are providing services.

For both large and small employers, “wages” are defined as taxable wages including certain contributions to health benefit plans.

​

ERC Eligibility 

Effective January 1, 2021, employers are eligible to claim the ERC if they operated a trade or business during 2021, and experienced either:

1. A full or partial suspension of the operation of their trade or business during a calendar quarter on account of a governmental order limiting commerce, travel or group meetings due to COVID-19; or

2. A decline in gross receipts in the first, second or third calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019.

For the calendar year 2021, eligible employers can claim a credit of up to 70% of qualified wages paid to employees after December 31, 2020, and before October 1, 2021. For 2021, the credit is equal to 70% of the first $10,000 in qualified wages per quarter, i.e. up to $7,000 per employee per quarter. As a result, an employer who qualifies for the ERC can get a maximum credit of $7,000 per quarter per employee, a total of $21,000 for 2021.