The Employee Retention Credit of 2021 (ERC)
Who is eligible?
Your eligibility as an employer is based on gross receipts of less than 80% (versus less than 50%) compared to the same quarter in 2019. This means if your gross receipts decline more than 20% in 2021, you are eligible to take the credit.
How is the credit calculated?
For 2021, the Employee Retention Credit is equal to 70% of qualified employee wages paid in a calendar quarter. Eligible wages per employee max out at $10,000 per calendar quarter in 2021, so the maximum credit for eligible wages paid to any employee during 2021 is $28,000. The calculations can be tricky.
How do I claim 2020 ERC?
An eligible employer may file a claim for refund or make an interest-free adjustment by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, for a past calendar quarter to claim the ERC to which it was entitled on qualified wages paid in that past calendar quarter, following the rules and procedures for making those claims or adjustments.
Significantly, it made it so that an employer that did not take an ERC for 2020 because it or its controlled member received a PPP loan may now be eligible for ERCs for 2020. Now, as of the March 11 passage of the American Rescue Plan Act, the ERC is available for all four quarters of 2021.