The COVID-19 pandemic has had a significant impact on businesses across the United States. In an effort to help alleviate some of the financial burdens placed on employers, the federal government established the Employee Retention Tax Credit Program. This program was created to encourage employers to keep their employees on the payroll during this difficult time by offering them a tax credit for each employee retained.
The Employee Retention Tax Credit Program is a refundable tax credit that can be claimed by eligible employers. This means that if the credit exceeds the employer’s tax liability, the excess credit amount will be refunded to the employer. The credit is available to eligible employers for wages paid after March 12, 2020, and before January 1, 2022.
To be eligible for the program, employers must have experienced a significant decline in revenue due to the pandemic. Specifically, businesses must have experienced a 50% decline in revenue compared to the same quarter in 2019. Alternatively, businesses that were forced to partially or fully shut down by government orders may also be eligible.
The Employee Retention Tax Credit Program is designed to incentivize employers to keep their employees on the payroll, even if they are not able to work due to COVID-19 related reasons. Employers can receive a tax credit for each employee that they retain, regardless of whether the employee is able to work or not.
The credit is calculated as 70% of eligible wages paid to employees during the qualifying period, up to a maximum of $10,000 per employee per quarter. Eligible wages include all compensation paid to employees, including health benefits, but do not include wages paid to family members of the employer or wages paid to employees who are not working due to reasons other than COVID-19.