what is erc tax credit

The Employee Retention Credit (ERC) is a refundable tax credit for businesses and tax-exempt organizations that paid qualified wages after March 12, 2020, through the end of the program to keep their staff employed during the COVID-19 pandemic. The credit is designed to encourage employers to keep employees on their payroll and is based on payroll taxes employers previously remitted. The credit is 50% of up to $10,000 in wages paid by an employer whose business is fully or partially suspended because of COVID-19 or whose gross receipts decline by more than 50% . For most businesses, the credit could be claimed on wages paid until September 30, 2021, with certain businesses having until December 31, 2021, to have paid qualified wages. The credit is available to all employers regardless of size, including tax-exempt organizations, with only two exceptions: state and local governments and their instrumentalities and small businesses who take Small Business Loans. The ERC is a quarterly tax credit against the employers share of certain payroll taxes, and the tax credit is 70% of the first $10,000 in wages per employee in each quarter of 2021. The credit is worth up to $7,000 per quarter and up to $28,000 per year, for each employee. If the amount of the tax credit for an employer is more than the amount of the employer’s share of those payroll taxes owed for a given quarter, the excess is refunded directly to them.