What is the eligibility of Employee Retention Tax Credit for business in USA

Employee Retention Tax credit (ERC) is a refundable tax credit for the employees against certain employment taxes which is equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. The eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer's employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS. The Employee retention tax credit, also referred to as the ERTC, was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which came into effect in March 2020. This law was formulated to encourage businesses to keep employees on their payroll. The Consolidated Appropriations Act, 2021 (CAA), enacted in December 2020, and the American Rescue Plan Act (ARPA), enacted in March 2021, amended and extended the credit and the availability of certain advance payments of the credits through the end of 2021. The ARPA, for instance, allows small employers that received a Paycheck Protection Program (PPP) loan to also claim the ERTC.

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Eligibility Criteria

There are no such limits or eligibility criteria for Employee Retention Tax Credit. However different kinds of businesses are treated differently.

For businesses with 100 full-time employees or less- In this case, all the wages of the employee qualify for the credit. Irrespective of whether the business is in running state or has been subjected to shut down.
For businesses with more than 100 full-time employees- In this case, the credits are qualified for the employees when an employee was not able to render services due to covid-19 related circumstances.
Private-sector businesses and tax-exempt organizations are also eligible for Employee Retention tax credit. But there are certain clauses to it:

Businesses that faced full or partial shutdown of operations as a result of a government order limiting commerce due to COVID-19 during 2020 or 2021.
Gross receipts decline by more than 50 percent during a 2020 or 2021 calendar quarter when compared to the same quarter in the prior year.
A "recovery startup" business that was launched after Feb. 15, 2020, for which the average annual gross receipts do not exceed $1 million, subject to a quarterly ERTC cap of $50,000.

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This release was published on openPR.