Trades or businesses that sustained a considerable drop in gross receipts during the pandemic or whose operations were fully or partially halted due to governmental orders are eligible for the ERC. For the years 2020 and 2021, there are different requirements for ERC.
ERC Qualifications for 2020
Employers can apply for the ERC for the calendar year 2020 if they ran a trade or business during the year and encountered one of the following:
- a government order restricting commerce, travel, or group meetings as a result of COVID-19. Which results in the entire or partial suspension of their trade or business operations during any calendar quarter; or
- a notable drop in gross receipts of more than 50% from the same quarter the previous year.
The maximum credit for an employer who is eligible for the ERC is 50% of the first $10,000 in qualified wages or up to $5,000 per employee. The maximum qualified wages taken into account for each employee for all calendar quarters is $10,000.
ERC Qualifications for 2021
Employers can apply for the ERC effective January 1, 2021, if they ran a trade or business in 2021 and experienced one of the following:
- during a calendar quarter, a government order restricting commerce, travel, or group meetings as a result of COVID-19 has completely or partially prevented them from conducting their trade or business; or
- a drop in gross receipts in the first, second, or third calendar quarter of 2021 that sees that quarter’s gross receipts fall below 80% of those in the corresponding quarter of 2019.
A credit of up to 70% of the qualified wages paid to employees after December 31,2020, but before October 1,2021, may be claimed by eligible businesses for the calendar year 2021. For 2021, the credit is equal to $7,000 per employee per quarter or 70% of the first $10,000 in eligible salaries. Therefore, a company that meets the requirements for the ERC may receive a maximum credit of $7,000 each quarter per employee, or $21,000 in total, for 2021.
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