What is the eligibility for Employee Retention Credit?
1.6k views | Last modified 2/28/2022 3:09:45 AM EST | Added by TaxBandits Team

 

In March 2020, the US Government passed an Act, Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to reduce the impact of the economic downturn during this pandemic.

One such provision under this CARES Act is the Employee Retention Credit. The ERTC is a refundable credit that businesses can claim on qualified wages, including certain health insurance costs, paid to employees.

Most employers, including colleges, universities, hospitals and 501(c) organizations following the enactment of the American Rescue Plan Act, can qualify for the credit. 

Qualification is determined by one of two factors for eligible employers — and one of these factors must apply in the calendar quarter the employer wishes to utilize the credit:

• A trade or business that was fully or partially suspended or had to reduce business hours due to a government order. The credit applies only for the portion of the quarter the business is suspended, not the entire quarter.
• An employer that has a significant decline in gross receipts.

Not be eligible for the ERTC under the other two categories, partial/full suspension of operations or decline in gross receipts

You are partially or entirely affected by this pandemic and cannot run your operations. You have a massive decline in gross receipts, almost 80% less than what your gross receipts were in the same quarter of 2019.

On Tuesday, Aug. 10, 2021, the IRS released Revenue Procedure 2021-33 that provides a safe harbor under which an employer may exclude the amount of the forgiveness of a PPP loan and the amount of a Shuttered Venue Operators Grant or a Restaurant Revitalization Fund grant from the definition of gross receipts solely for the purpose of determining eligibility to claim the ERTC. Employers must apply the safe harbor consistently across all entities.

American Rescue Plan Act – 2021:

3rd and 4th quarter 2021 only - A third category has been added. Those entities that qualify may be entitled to up to $50,000 per quarter.

 

To qualify as a Recovery Startup Business, one must:

• Have begun carrying on trade or business after Feb. 15, 2020
• Have annual gross receipts that do not exceed $1 million.

Not be eligible for the ERTC under the other two categories, partial/full suspension of operations or decline in gross receipts.

• You are partially or entirely affected by this pandemic and cannot run your operations.
• You have a massive decline in gross receipts, almost 80% less than what your gross receipts were in the same quarter of 2019.