The Employee Retention Credit

This is another government program designed to reward employers that retained employees during 2020 and 2021. It is a refundable tax credit, but it’s not clear against which taxes: corporate or employer taxes on employees. Some handouts also say that it’s a grant, but that probably depends on whether your original PPP loan was in fact a grant. Some lenders have also converted grants into loans, but you probably know in which category you are.

Your CPA should know about this program, but many do not, which is why I’m doing this blog. The program, like the original PPP, has probably also seen its share of fraud.

You can get up to $5,000 per employee for 2020, and for 2021, the credit can be up to $7,000 per employee. The total can be up to $26,000 per employee, which means there might be other requirements.

Here are the eligibility requirements:

  1. During the government shutdown of 2020 and 2021, you experienced substantial reduction in your operating hours, inability to travel or restriction of group meetings.
  2. You need not have been deemed an ‘essential’ business.
  3. You experienced a shut-down of your supply chain or your vendors.
  4. If you received a PPP grant or loan, you are still eligible.
  5. If you remained open, you must have experienced at least a 20% decline in gross revenues. If you changed operating methods as a result of government orders, you’re eligible

The law was passed in 2022, and there are several entities out there that can help you if your CPA can’t. We don’t make any representations about the worth of any of them.