ERC Program Eligibility – Who Qualifies for the Employee Retention Tax Credit?

February 28, 2023

The Employee Retention Credit, or the ERC, has the potential to help provide significant relief to businesses impacted by the COVID-19 pandemic. It is a fully refundable payroll tax credit that some businesses can claim on qualified wages paid to their employees if they kept staff during the height of the crisis. But when it comes to ERC program eligibility, there is some confusion about who qualifies to apply for the credit and who doesn’t.

What is the ERC?

The ERC program was established under the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act to incentivize qualified businesses to keep employees on payroll and to support businesses during the worst of the financial crisis caused by the COVID-19 pandemic. 

It offset quarterly employment taxes businesses were required to pay for 2020 and 2021, although businesses can still retroactively claim the ERC from those past payroll tax returns.

Who Qualifies for the ERC?

ERC eligibility differs for calendar years 2020 and 2021. In general, employers are eligible to claim the ERC for calendar year 2020 if they operated a business then and experienced either a full or partial suspension of the operation of their business during any quarter that year due to a governmental order limiting certain operations, or if the business experienced a significant decline in gross receipts by more than 50 percent as compared to the same quarter from the previous year.

As for 2021, employers can retroactively claim the ERC if they operated a business that year and experienced either a full or partial suspension of the operation of their business during a calendar quarter as a result of government orders due to COVID-19, or if their business experienced a decline in gross receipts in the first, second, or third calendar quarter in 2021 and the gross receipts of that calendar quarter are less than 80 percent of the gross receipts in the same 2019 calendar quarter.

There are other factors in play as well, including what counts as qualified wages, maximum credits that can be claimed, eligibility under the governmental order test, and more. For that reason, we strongly recommend getting professionals like the ones at Phillips Law Group involved to help you apply for the ERC program. 

How Phillips Law Group can help

The team at Phillips has extensive experience and expertise in helping businesses with tax credit needs and with securing ERC funds in particular. In fact, Phillips and our partners have already been involved in obtaining ERC tax credit refunds for hundreds of companies and we have already applied for more than $100 million in credits!

To find out if you and your business are eligible to apply for the ERC, please contact us by giving us a call or by filling out the form on this page. We can help you work out the particulars of applying for the ERC program while you get back to running your business.