The Employee Retention Tax Credit (ERTC) or Employee Retention Credit (ERC) is a tax credit many employers can claim if they operated during the height of the pandemic. Many employers have questions about claiming the credit, filing an amended return, and whether employees must be notified. Employers taking this credit must notify their employees by posting a notice on their website or in their workplaces. Here are more answers to employer ERTC questions that employees often raise.

What Is the Employee Retention Credit (ERC)?

The ERTC/ERC is a tax credit that allows employers to claim a refund for wages paid during 2020 and the first three quarters of 2021. Employers must meet certain eligibility requirements, and if they borrowed a Paycheck Protection Program (PPP) loan, it could affect the amount of credit they can claim.

Who Is Eligible To Claim the ERTC?

Eligible employers may claim the credit for qualifying wages from March 13, 2020, through September 30, 2021. Additionally, if your company was a recovery startup business, you may be able to claim the credit for qualifying wages paid during Q4 of 2021.

To be eligible, your business must have experienced:

  • A full or partial suspension of operations in response to a government order, including a full or partial shutdown, reduced capacity, or operational restrictions OR
  • A significant decline in gross receipts of 50% or more in 2020 compared to the corresponding quarter in 2019* OR
  • A significant decline in gross receipts of 20% or more in qualifying quarters of 2021 compared to the corresponding quarter in 2019*

If your recovery startup business did open its doors after February 15, 2020, you may be eligible to claim the ERTC under specific rules for up to $50,000 each quarter in Q3 and Q4 of 2021 for a total credit of $100,000.

Are Employees Able To Claim the ERTC?

Employees cannot claim the ERTC. Only eligible employers who paid qualifying wages during applicable quarters of the pandemic of 2020 and 2021 may claim the ERTC/ERC. Employers also do not need to disclose to employees whether they claimed the ERTC.

How Does Claiming the ERTC Work?

One of the most common ERTC questions is how to claim the ERTC/ERC. Employers must file Form 941-X, the Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. This form allows you to correct errors and adjust any quarterly employment tax return you filed for qualifying quarters when you wish to claim the ERTC.

For each qualifying full-time employee, employers may receive up to $5,000 for the ERTC in 2020 and up to $7,000 for each quarter of 2021 through Q3. Q4 is not eligible for the ERTC unless your business is a recovery startup.

Recovery startup businesses may qualify for a total of $100,000 for the ERTC in Q3 and Q4 of 2021. To be a recovery startup business, your company must have opened after February 15, 2020, with at least one full-time employee who isn’t a proprietor or family member and less than $1 million in gross receipts.

Can an Employer Who Got a PPP Loan Claim the ERC?

If an employer received a PPP loan to cover payroll expenses or reinvest in their business during the pandemic, they may not claim the ERTC for any wages paid with PPP loan funds. Instead, the employer must only claim the credit for qualifying wages paid directly outside of funding from a PPP loan or funds from loan forgiveness.

Contact Dayes Law Firm for More Information About the ERTC

For more employer ERTC questions, contact the Dayes Law Firm. We can help you determine whether your business is eligible for the ERTC and how to calculate and apply for the credit. Call us at (866) 567-4510 or contact us online to schedule a free consultation with a business tax attorney.