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An Overview of The Employee Retention Tax Credit (ERTC)

What Is Employee Retention Credit For?

Employee Retention Tax Credit was a scheme implemented in March 2020 to help out businesses that had struggled with closures or restrictions due to the pandemic.

Many small to medium businesses were left struggling with the dilemma. They either let go some of their trusted employees due to lack of profits, meaning they’d have to recruit and retrain new people when the world opened back up again, or they could continue to pay their employees to help pay their bills in the hope that they could make the money back later.

ERC was implemented through the IRS to reward those businesses who chose to help maintain the economy and keep on their staff during this difficult period.

How Much Money Is My Business Entitled to?

In 2020, businesses were entitled to 50% of each employee’s wages per quarter up to a possible $10,000.

However, due to the ongoing restrictions, this amount was increased in quarters 1-3 of 2021, where employers could claim back a potential 70% of their employee’s wages per quarter up to $10,000.

This is a potential $26,000 per employee if they were employed throughout the whole period. The average amount paid back per employee so far is $11,000.

ERTC Eligibility Criteria

To be eligible for ERTC, there are some criteria that each business needs to meet.

  • In 2020, the scheme focused on small businesses of up to 100 employees working full time. In 2021, this became a little more generous and included businesses of up to 500 full time employees. Businesses with more than 500 employees are considered ‘large businesses’ and therefore, would not qualify.


  • The business also needs to display a significant decline in profits over the period due to the restrictions. This must show that the business has made at least 20% less than it would normally have using financial statements or forecasting models. For businesses that have no prior financial statements to base this on, a simple forecasting model predicting the profits may be enough.


  • Businesses must also show that they have retained the same headcount as they had prior to the pandemic. The scheme was put in place to keep people in the workplace, so to claim, you must have had those people on the books throughout the pandemic.

How Does ERTC Work?

The ERC payment will arrive via check or as a lump sum straight to your bank account. You should be aware that you can only claim ERC for full-time employees and the amount would not include anything spent on expenses or healthcare during this time.


If you operate a business that normally includes tips – a bar or restaurant, for example, the $20 per month would be included per employee as qualified wages.

PPP Qualifications

You can still qualify for ERC, even if you had previously applied for PPP for an employee. This scheme was adopted in 2021, so you may be able to claim on both schemes for individual employees throughout this year. However, in 2020, this scheme required you to apply for one or the other.

If you previously applied and received PPP for your employees in 2020, you may not be able to receive the ERC payment for this year as well.

How to Apply For ERC?

Although the scheme ended in 2021, businesses still have until April 2024 to amend their tax filing statements. Many businesses were unaware of the potential of ERTC or didn’t know how to apply it. Filing an amendment via Form 914-X can help you to pull some of that cash back.

The process of claiming can be daunting and time consuming for businesses. You will be able to find specialist companies such as ERC Benefits that help businesses with their application so that they can achieve a maximum tax credit and where they take on all of the intensive work. These services are highly recommended for businesses to use.

If you’re not confident about filing your tax amendment, or you’re a little confused about how to claim for ERC, then it’s important to contact your accountant, tax professional, or payroll company, as they will be able to provide more advice and support to make sure you get the full amount due to you.


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