Employee Retention Credit Eligibility Checklist: Help understanding this complex credit


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The Employee Retention Credit (ERC or ERTC) is a complex tax credit for businesses and tax-exempt organizations that kept paying employees during the COVID-19 pandemic either when they were shut down due to a government order or when they had the required decline in gross receipts during certain eligibility periods in 2020 and 2021.

The IRS continues to see aggressive marketing that lures ineligible taxpayers to claim the ERC. While the credit is real, many promoters are aggressively misrepresenting who can qualify for the credit. In many instances, the IRS is seeing businesses and tax-exempt organizations being misled by promoters into thinking they're eligible when they are not.

As a reminder, anyone who incorrectly claims the ERC must pay it back, possibly with penalties and interest. The IRS wants to help taxpayers avoid this situation, so they prepared this question-and-answer tool to help employers figure out if they may be eligible for the credit. You can use this tool with someone who is considering claiming the credit or with someone who has already submitted a claim to the IRS.

The IRS is committed to helping taxpayers while preventing incorrect ERC claims and fraud.

Part A: Checking your eligibility

This tool can help a business or other organization quickly decide if they may qualify for the Employee Retention Credit. This is a very technical area of the law, but this resource includes the main eligibility factors. Answer these questions in numerical order to see if you may be eligible to claim the ERC.

ERC Eligibility Checklist

Question 1

Did you 1) operate a trade, business or tax-exempt organization and 2) have employees and pay wages to them between March 13, 2020, and Dec. 31, 2021?

For more info, see IRS.gov/ercqualified. Note – Household employers are not eligible for ERC.

Question 2

Did your trade or business experience the required decline in gross receipts during the eligibility periods in 2020 or the first three calendar quarters (Jan. through Sept.) of 2021?

For more info and examples, see IRS.gov/ercdecline

Question 3

Are you claiming the ERC because of supply chain issues?

For more info, see IRS.gov/ercsupply and the IRS legal memo on supply chain disruptions (AM-2023-005), which includes examples.

Question 4

Was the operation of your business or organization fully or partially suspended by a government order due to the COVID-19 pandemic during 2020 or the first three calendar quarters (Jan. through Sept.) of 2021?

  • The order must be a government order, not guidance, a recommendation or a statement.
  • The government order must be due to the COVID-19 pandemic and must have fully or partially suspended your operations.
  • You can only claim ERC for periods the order was in effect and your operations were suspended.

For more info, see IRS.gov/ercqualifying

Question 5

Were you a recovery startup business (RSB)? This means you:

  • Began carrying on a trade or business after Feb. 15, 2020,
  • Had $1 million or less in average annual gross receipts for the prior 3 tax years, and
  • Didn’t qualify for ERC under the gross receipts test (#2) or suspension test (#4)?

For more info, see IRS.gov/ercrecovery

Part B: Claiming the ERC if you’re eligible 

If the previous questions directed you to Part B, you may qualify for the ERC based on the information you provided. Be sure you have thorough records that show wages paid, gross receipts, government orders and other required documents. If you need help, you should work with a trusted tax professional. You can find more information at IRS.gov/erc such as frequently asked questions, examples, guidance, warning signs of scams and more.

Part C: Resolving an incorrect ERC claim

If you incorrectly claimed the Employee Retention Credit, you can use the ERC claim withdrawal process outlined at IRS.gov/withdrawmyerc if all of the following apply:

  • You made the claim on an adjusted employment tax return (Forms 941-X, 943-X, 944-X, CT-1X).
  • You filed your adjusted return only to claim the ERC, and you made no other adjustments.
  • You want to withdraw the entire amount of your ERC claim.
  • The IRS has not paid your claim, or the IRS has paid your claim but you haven’t cashed or deposited the refund check.

Requesting a withdrawal means you’re asking the IRS not to process your entire adjusted return that included your ERC claim. If the IRS accepts your request, the claim will be treated as if it was never filed.

If you’re not able to use the withdrawal process, you can still file another adjusted return if you need to reduce the amount of your ERC claim or make other changes to your adjusted return

If you incorrectly claimed the credit and cashed or deposited your refund check, watch IRS.gov/erc for updates. You can’t use the withdrawal process. However, the IRS is working on guidance to help employers that were misled into incorrectly claiming the ERC and received the credit.

Printable checklist for IRS partners

If you need a printable version of this resource to help constituents, clients or others to see if they may be eligible for the ERC, see the Employee Retention Credit Eligibility ChecklistPDF.