What is the Employee Retention Tax Credit?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act created a new employee retention tax credit for employers who are closed, partially closed, or experiencing significant revenue losses as a result of COVID-19.

Who is ELIGIBLE?

Private employers, including non-profits, carrying on a trade or business in 2020 that:

  • Have operations partially or fully suspended as a result of orders from a governmental authority due to COVID-19, or
  • Experience a decline in gross receipts by more than 50% in a quarter compared to the same quarter in 2019 (eligibility ends when gross receipts in a quarter exceed 80% compared to the same 2019 quarter)

With respect to tax-exempt organizations under 501(c) of the tax code, the requirement to be partially or fully suspended applies to all operations of the organization.

Employers who receive a Paycheck Protection Program (PPP) loan are not eligible for a tax credit. 

To learn more, click here.

To download the Guide to the Employee Retention Tax Credit, click here.

To access IRS Form 7200, which is needed to claim the credit, click HERE. 

To find the IRS’ answers to FAQs about the credit, click HERE. 

UPDATE (JANUARY 2021):

Prior to 2021, the employee retention tax credit applied only to an employer who experienced a decline in gross receipts of more than 50% in a quarter compared to the same quarter in 2019. For 2021, eligibility is now expanded to include employers who experienced a decline of more than 20%.

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