What is the Employee Retention Credit?
The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000. An Eligible Employer may not receive the Employee Retention Credit if they receive a PPP loan that is authorized under the CARES Act. If applying for a PPP loan, this credit should not be claimed.
Qualified wages
The definition of qualified wages depends, in part, on the average number of full-time employees employed by the Eligible Employer during 2019.
If the Eligible Employer averaged more than 100 full-time employees in 2019, qualified wages are the wages paid to an employee for time that the employee is not providing services.
If the Eligible Employer averaged 100 or fewer full-time employees in 2019, qualified wages are the wages paid to any employee during the period of economic hardship.
Lastly, when determining an employer’s eligibility for the credit including the number of employees, aggregation rules must be considered as members of a group may be considered a single employer.
Helpful links with more information
COVID-19-Related Employee Retention Credits: General Information FAQs.
COVID-19-Related Employee Retention Credits: Determining Qualified Wages FAQs.
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