What is the Employee Retention Tax Credit (ERC)?
Simply put, the Employee Retention Tax Credit (ERC or ERTC) is a refundable payroll tax credit available to employers that experienced a significant loss of revenue or had to fully or partially close due to government COVID-19 orders for qualified wages paid March 13, 2020 through Sept. 30, 2021*.
Launched in March 2020 under the CARES Act, ERC was another relief option intended to help keep workers on payroll. Due to its complexity (lots of math), most employers opted for the relatively-less-complicated Paycheck Protection Program (PPP) loan. (Per requirements in the original CARES Act, employers could not use both ERC and PPP in 2020.)
The 2021 Consolidated Appropriations Act (CAA) revised the CARES Act ERC rules so employers can now use both PPP and ERC – including retroactively to 2020. There are some caveats, calculations, and considerations to be made for using PPP and ERC (refer to the SBA’s Cross-Program Eligibility Guide for specific criteria on using different funding options). Still, given that it may result in thousands of more dollars in financial support, we think it’s worth the extra effort. (And if you’re an ASAP payroll or accounting client, we can help!)
*Initially, ERC was available for qualified wages paid through Dec. 31, 2021. However, the “Infrastructure Investment and Jobs Act” removed this credit for the fourth quarter of 2021.