Can I Claim the Employee Retention Credit?

The CARES Act provides a refundable tax credit, called the Employee Retention Credit (ERC), to help employers retain their workforce during the COVID-19 crisis. This article will provide an overview of what the ERC is and who qualifies for it. It will also discuss how to claim the ERC on Form 941 and Schedule R.

What Is the Employee Retention Credit?

The Employee Retention Credit (ERC) is a refundable tax credit designed to help businesses retain their employees during the COVID-19 pandemic. It was established as part of the CARES Act in response to the financial hardships facing many businesses due to the pandemic. The ERC is available to employers that experience full or partial suspension of operations due to governmental orders, or whose gross receipts decline by more than 50% compared to the same quarter in 2019.

Who Is Eligible for the ERC?

The Employee Retention Credit is available to most employers with 500 or fewer employees, including non-profits. Businesses that are eligible for the Paycheck Protection Program (PPP) are not eligible for the ERC. Employers must meet certain conditions in order to qualify, such as having experienced full or partial suspension of operations due to governmental orders, or having experienced a decline in gross receipts of more than 50% compared to the same quarter in 2019.

How Do I Claim the Employee Retention Credit?

Form 941

To claim the Employee Retention Credit, employers must complete Form 941, the employer’s quarterly federal tax return. On this form, employers must indicate whether they are claiming the ERC. They must also include the amount of wages paid to each employee as well as any qualified health plan expenses. The total amount of the ERC is then calculated based on these amounts.

Schedule R

Employers must also complete Schedule R, which calculates the amount of the ERC. This schedule requires information about the number of employees and their wages, as well as any qualified health plan expenses. Once completed, employers must attach Schedule R to their Form 941 when filing taxes.

The Employee Retention Credit is a refundable tax credit available to employers with 500 or fewer employees that have experienced full or partial suspension of operations due to governmental orders, or whose gross receipts declined by more than 50% compared to the same quarter in 2019. Employers must complete Form 941 and Schedule R in order to claim the ERC. Both forms require information about the number of employees and their wages, as well as any qualified health plan expenses. By utilizing the Employee Retention Credit, employers can help ensure their employees are retained during the COVID-19 pandemic.