UPDATE 3.11.21: President Biden signed the American Rescue Plan Act of 2021 on March 11, extending the Employee Retention Credit (originally established last year by the CARES Act) to Dec. 31, 2021.
The credit is equal to 70% of the qualified wages that do not exceed $10,000 for any calendar quarter. Thus, the total credit per employee is limited to $7,000 per quarter.
Eligible employers are those whose trade or business is fully or partially suspended during the calendar quarter due to orders from the government due to COVID-19, or whose gross receipts are less than 80% for the same calendar quarter in 2019.
For purposes of the ERC, qualified wages are determined differently for large (more than 500 full time employees in 2019) versus small employers (500 or less full time employees in 2019).
Similar to the continuing paid and sick leave credit, the ERC will be claimed by employers against their portion of the Medicare tax, 1.45%.
UPDATE 12.28.20: Congress passed legislation Dec. 21, 2020 that was signed by the president Dec. 27 extending the employee retention tax credit through July 31, 2021.
That legislation also extends other tax credits, including reimbursing employers for paid sick and family leave benefits paid to employees due to COVID-19 through March 31, 2021.
The federal Coronavirus Aid, Relief, and Economic Security Act created an employee retention tax credit for employers impacted by the COVID-19 pandemic.
The refundable credit represents 50% of up to $10,000 in wages paid by an eligible employer whose business is financially impacted by COVID-19.
The refundable tax credit is available to all employers regardless of size, including tax-exempt organizations, with two exceptions—state and local governments and employers that accept small business loans.
The U.S. Chamber of Commerce issued this guide to help employers understand the program.uscc_covid19_employee-retention-tax-credit