Unlock Financial Relief: Claim the Employer Retention Credit (ERC) and Receive Up to $26,000 Per Employee
Learn the history of the "Employer Retention Credit (ERC)" and discover how eligible businesses can still file for up to $26,000 per employee for the 2020 and 2021 tax years—without any upfront fees.
The History of the Employer Retention Credit (ERC) and How Employers Can Benefit Today
The Employer Retention Credit (ERC) was introduced during one of the most challenging times for businesses in recent history—the COVID-19 pandemic. This credit was designed as a lifeline to help businesses keep employees on their payrolls, even during periods of severe economic hardship. Today, many employers still have the opportunity to claim this credit for the 2020 and 2021 tax years, and for many, the financial relief could be substantial.
In this blog, we will explore the history and evolution of the ERC, the benefits available to employers, current statistics on filed and non-filed applications, and how you can file for the credit without paying any upfront fees.
The Origins of the Employer Retention Credit (ERC)
The ERC was first introduced under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The CARES Act was a sweeping legislative package that provided trillions of dollars in relief for individuals, businesses, and healthcare providers. The goal was to mitigate the economic devastation caused by the pandemic, which led to widespread business closures, massive layoffs, and a rapid decline in economic activity.
One of the key provisions of the CARES Act was the creation of the ERC, which was designed to incentivize employers to retain their employees, even if their businesses were financially struggling. The ERC was introduced alongside other relief programs, such as the Paycheck Protection Program (PPP). Initially, businesses had to choose between the ERC and PPP, which made it less appealing to many employers who opted for PPP loans.
However, legislative changes in 2021 allowed businesses to retroactively claim the ERC, even if they had already received a PPP loan, making the credit far more accessible and valuable.
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Expansion Under the Consolidated Appropriations Act and American Rescue Plan
As the pandemic continued into 2021, it became clear that businesses needed ongoing support to survive. In response, Congress passed additional relief packages that expanded the scope and benefits of the ERC.
- Consolidated Appropriations Act of 2021: This legislation, passed in December 2020, made several critical changes to the ERC. Most notably, it allowed employers who received a PPP loan to also claim the ERC, which had previously been prohibited. It also extended the ERC through the first half of 2021 and increased the maximum credit amount.
- American Rescue Plan Act of 2021: In March 2021, this act further extended the ERC through the end of 2021, providing more opportunities for businesses to claim the credit. The American Rescue Plan also introduced provisions to support "recovery startup businesses," allowing newer businesses to take advantage of the credit even if they weren’t fully operational in 2020.
Key Benefits of the Employer Retention Credit (ERC)
The ERC provides substantial financial benefits to employers, especially for those who kept employees on the payroll during periods of economic uncertainty.
Here’s what employers can expect:
- Up to $26,000 Per Employee: The ERC is a refundable payroll tax credit. For eligible businesses, the credit can be up to $5,000 per employee for 2020 and up to $7,000 per employee per quarter for the first three quarters of 2021. That means businesses can potentially claim up to $26,000 per employee in total for both years.
- Refundable Credit: Unlike other credits that only reduce the amount of tax owed, the ERC is refundable, meaning businesses can receive a refund if the credit amount exceeds their payroll tax liability. This can result in significant cash refunds for employers.
- Eligibility Based on Revenue Decline or Full/Partial Shutdown: Employers can qualify for the ERC in several ways. One way is by showing a significant decline in gross receipts during 2020 or 2021 compared to pre-pandemic levels. Alternatively, businesses that were forced to fully or partially suspend operations due to government orders related to COVID-19 may also qualify.
- Claim for Both 2020 and 2021: Businesses can retroactively claim the ERC for wages paid in 2020 and 2021, even if they didn’t initially file for the credit. This retroactive claim can result in large refunds, providing a substantial financial boost to businesses that missed out on the credit previously.
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Eligibility Criteria for the ERC: To claim the ERC, employers must meet certain criteria. These include:
1. Full or Partial Suspension of Operations: Businesses that were forced to shut down fully or partially due to COVID-19-related government orders may be eligible for the ERC. This includes interruptions like mandatory capacity reductions or closures of specific parts of the business (e.g., dining rooms in restaurants).
2. Significant Decline in Gross Receipts: For 2020, businesses qualify if their gross receipts declined by more than 50% in a calendar quarter compared to the same quarter in 2019. For 2021, the threshold was reduced to a 20% decline compared to 2019.
3. Qualified Wages: The wages that can be included in the ERC calculation depend on the size of the business. For businesses with 100 or fewer full-time employees, all wages paid during an eligible quarter can qualify. For larger businesses, only wages paid to employees who were not providing services during the eligible period can be included.
Filed vs. Non-Filed Applications: The Untapped Opportunity
Despite the ERC’s significant financial benefits, many businesses have yet to file for the credit. Here’s a look at the current landscape:
- Filed Applications: Approximately 35% of eligible businesses have filed for the ERC. These businesses have already received substantial refunds and credits, with many receiving six-figure payouts.
- Non-Filed Applications: A staggering 65% of eligible businesses have not yet filed for the ERC. Many are unaware of the program’s existence, while others mistakenly believe they are not eligible because they already took a PPP loan. Others are hesitant due to the perceived complexity of the filing process or concerns about upfront costs.
The non-filed applications represent billions of dollars in unclaimed credits. For many businesses, the ERC could mean the difference between struggling to stay afloat and having the financial resources to grow and expand in a post-pandemic world.
Why You Should File for the ERC Now?
If you’re an employer who kept employees on your payroll during 2020 or 2021, the ERC presents a unique opportunity to recoup some of your payroll expenses. Here are the key reasons why you should file:
- Substantial Financial Relief: With up to $26,000 available per employee, the ERC can provide significant financial relief to your business. For small and medium-sized businesses, this can translate to hundreds of thousands of dollars in refundable credits.
- Retroactive Filing: Even if you missed the opportunity to claim the ERC in real-time, you can still file retroactively for both 2020 and 2021. There’s no deadline for claiming the credit, but the sooner you file, the sooner you’ll receive your refund.
- No Upfront Fees: Many service providers offer to file your ERC claim with no upfront fees. These services only charge a fee once your business receives the refund, meaning there’s no financial risk in getting started.
- Additional Funding for Recovery: As businesses continue to recover from the economic impact of the pandemic, the ERC can provide a much-needed infusion of cash to help with operating expenses, growth initiatives, and workforce expansion.
How to File for the ERC Without Upfront Fees:
Filing for the ERC can seem daunting due to the detailed documentation and qualifications involved. However, there are several steps you can take to streamline the process:
1. Determine Eligibility: Check if your business experienced a significant decline in gross receipts or was subject to a government-mandated shutdown during 2020 or 2021. If either applies, you’re likely eligible.
2. Gather Documentation: Collect payroll records, gross receipts data, and any documentation related to government shutdown orders. This information will be critical for calculating your ERC and submitting your claim.
3. Partner with a Professional Filing Service: To ensure accuracy and maximize your refund, work with a tax credit specialist or CPA who has experience with ERC claims. Many professional services offer no upfront fees, meaning you only pay once you’ve received your ERC refund.
4. Submit Your Claim: Once your eligibility is confirmed and your documents are ready, submit your claim to the IRS. It’s important to ensure that all information is accurate to avoid delays in processing.
Don’t Miss Out on the ERC:
If your business retained employees during 2020 or 2021, you may be entitled to a significant refund through the Employer Retention Credit. With up to $26,000 per employee available, this program offers substantial financial relief that many businesses have yet to claim.
Don’t leave money on the table. Get started on your ERC claim today, and take advantage of the opportunity to file without any upfront fees. Partner with a trusted tax professional or service to ensure you receive the full amount you’re entitled to.
Start the process now and secure the financial relief your business deserves!
The Employer Retention Credit offers a powerful way for businesses to recover from the financial challenges of the pandemic. Act now to file your claim and unlock the benefits designed to support your business and employees.
