Employee Retention Payroll Tax Credit (ERTC)

Eligibility

Business operating in 2020 OR 2021 AND one of the following must be true:

Partial or full shutdown due to a government order
50% (in 2020) / 20% (in 2021) decline in gross receipts in a quarter compared to the corresponding quarter in 2019 or preceding quarter

In 2020, eligibility continues until the first quarter in which the decline is less than 20% of corresponding quarter in 2019

Qualified Wages

In 2020:

For employers with < 100 employees, all wages and health care costs paid to employees
For employers with > 100 employees, only wages and healthcare costs to employees that are not providing services

In 2021:

For employers with < 500 employees, all wages and healthcare costs paid to employees
For employers with > 500 employees, only wages and healthcare costs to employees that are not providing services

Wages cannot be used for both the PPP and this credit. Previously a PPP loan disqualified a business from this credit.

Head Count

2019 is the measurement period for both 2020 and 2021, based on full-time employees.

By month, count only the employees who work on average 30 hours per week or 130 hours per month
Divide the sum of full-time employees for each month in 2019 by 12 for average full-time employees per month
Do not include owners, partners, 2% S-Corp shareholders

Credit

2020 - 50% of maximum wages/heath care costs of $10k max credit of $5k per employee for the year
2021 - 70% of maximum wages/heath care costs of $10k max credit of $7k per employee per quarter'

Claiming Credit

For prior quarters - file an amended payroll tax return
For current and future quarters - retain payroll tax deposits OR request an advance OR request a refund OR apply overpayment forward