What is Employee Retention Credit (ERC)?
1.5k views | Last modified 10/5/2023 8:25:14 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.

It is a refundable payroll tax credit against employment taxes equal to 50% of the “Qualified Wages” paid to retain employees from March 12, 2020, to December 31, 2020, and 80% of the “Qualified Wages” paid from January 1, 2021, to December 31, 2022. The qualified wages should not exceed $10,000 per employee for all calendar quarters.

The eligible employers were required to report details regarding the qualified wages and employee retention credit on their Form 941 (2020 and 2021). However, from 2022, the IRS has completely removed Employee Retention Credit from Form 941.