Employee Retention Credit (ERC) for 2020 and 2021
The ERC was introduced by the CARES Act in 2020, expanded under the Consolidated Appropriations Act of 2021 (CAA), and extended under the American Rescue Plan Act of 2021 (ARPA). It is designed to encourage employers (including tax-exempt entities) to keep employees on their payroll and continue providing health benefits during the coronavirus pandemic.
The ERC is a refundable payroll tax credit for wages and health plan expenses paid or incurred by an employer whose operations were either fully or partially suspended due to a COVID-19-related governmental order or where the employer experienced a significant reduction in gross receipts. The CAA extended the eligibility period of the ERC to June 30, 2021, increased the ERC rate from 50% to 70% of qualified wages and increased the limit on per-employee wages from $10,000 for the year to $10,000 per quarter ($50,000 per quarter for start-up businesses). In addition, employers that received a Paycheck Protection Program (PPP) loan and were previously prohibited from claiming the ERC may now qualify and can retroactively claim the ERC for 2020. The ARPA extended the ERC for another six months to December 31, 2021 under similar terms as provided in the CAA.
Stay up to date on the latest ERC guidance with our resources below. Find additional guidance surrounding ERC and other COVID-19-related regulation and legislation at our Crisis Response Resource Center.