The Employee Retention Credit (ERC) is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to Dec. 31, 2021. Eligible employers can claim the ERC on an original or adjusted employment tax return for a period within those dates. Only recovery startup businesses are eligible for the ERC in the fourth quarter of 2021. Employee Retention Credit - 2020 vs 2021 Comparison Chart Who Is Eligible An employer is eligible for the ERC if it: Sustained a full or partial suspension of operations limiting commerce, travel or group meetings due to COVID-19 and orders from an appropriate governmental authority or Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021 or Qualified in the third or fourth quarters of 2021 as a recovery startup business. Limitations Wages reported as payroll costs for PPP loan forgiveness or certain other tax credits can't be claimed for the ERC in any tax period. How to Claim Follow guidance for the period when qualified wages were paid: After March 12, 2020, and before Jan. 1, 2021 Notice 2021-20 Notice 2021-49 Revenue Procedure 2021-33 After Dec. 31, 2020, and before July 1, 2021 Notice 2021-23 Notice 2021-49 Revenue Procedure 2021-33 After June 30, 2021, and before Oct. 1, 2021 Notice 2021-49 Revenue Procedure 2021-33 After Sept. 30, 2021 and before Jan. 1, 2022 Notice 2021-49 Notice 2021-65 Forms and Instructions Use the revision date for the relevant tax period: Form 941-X Instructions April 2022 RevisionPDF Form 941 Instructions December 2021 RevisionPDF Form 941 Instructions 2020 RevisionsPDF Form 943PDF Form 943-XPDF Form 944PDF Form 944-XPDF Form CT-1PDF Form CT-1-X InstructionsPDF Beware of Third-Party ERC Schemes Employers should be wary of third parties advising them to claim the ERC when they may not qualify. For details see News Release IR-2023-40, IRS issues renewed warning on Employee Retention Credit claims; false claims generate compliance risk for people and businesses claiming credit improperly and COVID Tax Tip 2022-170. To report tax-related illegal activities relating to ERC claims, submit by fax or mail a completed Form 14242, Report Suspected Abusive Tax Promotions or PreparersPDF and any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations. Mail: Internal Revenue Service Lead Development Center Stop MS5040 24000 Avila Road Laguna Niguel, CA 92677-3405 Fax: 877-477-9135 Penalty Relief Get information on penalty relief related to claims for the Employee Retention Credit. More Information The Employee Retention Credit Frequently Asked Questions provide historical information about the credit and do not reflect the current status of the credit.
