The Employee Retention Credit (ERC) is a refundable tax credit designed to support employers during the early stages of the COVID-19 pandemic, encouraging them to maintain their workforce.

To claim the Employee Retention Credit for 2021, businesses should include it in their quarterly IRS payroll tax returns. This credit is based on the wages paid to employees during pandemic-related periods when the business either suspended operations or faced a significant decline in revenue.

Absolutely! You can claim the Employee Retention Credit for 2020 by amending your quarterly payroll tax return within three years from the original return’s due date.

Due to the ongoing pandemic-related backlog, the IRS is currently taking approximately 8-9 months to process Employment Retention Credit claims.

Yes, there is differentiation in how the Employee Retention Credit is applied to large and small employers. Small eligible employers can include wages paid to all employees, even part-time employees, while large eligible employers can only include wages paid to employees who were not providing services.

Whether a business is classified as a large or small employer depends on whether the average number of full-time employees employed during 2019 exceeded the applicable threshold amount.

In the context of the ERC, a “full-time employee” is defined as an employee who, for any given 2019 calendar month, worked either an average of at least 30 hours per week or 130 hours per month.

It’s important to note that “full-time equivalent employees” are not considered when determining whether an eligible employer is large or small, as clarified by the IRS in Notice 2021-49.

• For the 2020 ERC, the applicable threshold is 100 or fewer full-time employees (as counted in 2019).
• For the 2021 ERC, the applicable threshold is 500 or fewer full-time employees (as counted in 2019).
• In 2020, a “small employer” had an average of 100 or fewer full-time employees, exceeding which would classify them as large employers.
• In 2021, a “small employer” had an average of 500 or fewer full-time employees, with the same classification criteria.