With the post-pandemic economy picking up steam, small businesses must meet increased demand by beefing up their staff and retaining current employees.
That’s why the federal government included the Employee Retention Credit (ERC) as part of its first COVID economic relief package. The program allows small and midsized companies to claim money back on a percentage of wages paid to their employees, as CNBC explains.
Additionally, the ERC was later expanded to allow even more businesses to regain labor costs. Here’s how it works, per Paychex:
- The credit provides retroactive payments for 2020 wages as well as payments for wages paid through the end of 2021.
- It covers up to $7,000 per employee per quarter against employment taxes paid, for a potential total of $28,000 per employee each year.
- To qualify, your company must have 500 employees or less. Also, businesses must show that, beginning in 2021, they have seen more than a 20 percent drop in gross receipts in the quarter compared to the same quarter in 2019, or show they were impacted by forced closures or quarantines.
- To make a claim, you’ll need to submit a Form 7200.
That’s just the nuts and bolts of the credit program. For a more nuanced explanation of which businesses qualify, read more at CNBC.