Your business could be eligible in one of two ways:

1. It was fully or partially suspended due to a governmental order limiting commerce, travel or group meetings related to COVID-19.
2. It experienced a significant decline in gross receipts, as defined below.

If your business experienced a significant decline in gross receipts, as defined below, you may be eligible for the entire applicable quarter and potentially the following quarter. See more guidance about 2020 and 2021 from the IRS.

When the ERC was first introduced in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a business that received a PPP loan wasn’t eligible for the ERC.

Since the enactment of the Consolidated Appropriations Act, 2021 (CAA) in December 2020, PPP recipients can claim the ERC retroactive to March 13, 2020 on qualified wages that aren’t paid for with forgiven PPP loans.

Example: a business obtains a PPP loan of $2,500,000. During the loan coverage period, the business incurs $2,000,000 in payroll costs and $1,000,000 of other PPP-eligible expenses.

Expenses included in the PPP forgiveness application:
$1,500,000 60% payroll costs
$1,000,000 40% other PPP-covered expenses (rent, mortgage interest, etc.)
$2,500,000 Total potential loan forgiveness

The business may be able to claim the ERC on the remaining $500,000 of unforgiven payroll costs.

You may be able to claim the ERC if you’ve already applied for PPP loan forgiveness and you’ve already received other tax credits, so long as you don’t claim the ERC on the same wages.

The IRS prohibits “double-dipping” on these programs, which means that any wages used to qualify for one program typically can’t be used to qualify for another.

Such programs include but aren’t limited to the PPP, Sections 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA paid leave credits), the Section 45S credit for employer-provided paid family and medical leave, and the Work Opportunity Tax Credit (WOTC).

See more from the IRS here.

You’ll need the following:

1. An understanding of how your business is eligible for the credit (see the section “Is my business eligible for the ERC?” for details)
2. Gross receipts for your business for each quarter in 2019 through Q3 2021
3. A list of suspended locations with suspension dates (if you’re eligible due to a suspension mandated by a governmental order)
4. Detailed payroll information for your business, including health plan expenses

Unlike the PPP, the ERC calculation varies based on the average number of full-time employees (not full-time equivalents) your business had in 2019.

A “full-time employee” is an employee who works an average of at least 30 hours per week or 130 hours per month, as outlined in Section 4980H of the Internal Revenue Code.

Note that 1099 contractors should NOT be included here.

See more from the IRS here

An employee’s hire date has no effect on determining eligibility. Any employee can potentially be an eligible employee for the business if all other requirements (e.g., business eligibility, wages/health care paid) are met.

Employers should examine their employees’ telework capabilities to determine if they qualify for the credit. For example, if an employer can conduct comparable operations via telework, but the employer’s operations did not previously allow for telework or allowed for only minimal telework, then some adjustment period is expected and, generally, the employer’s operations may not be considered partially suspended during that period. However, if an employer incurs a significant delay (for example, beyond two weeks) in moving operations to comparable telework (for example, implementing telework policies or providing employees with equipment to telework), then the employer’s trade or business operations may be considered partially suspended during that transition period.

Small business:

If the business is partially suspended by a governmental order, all wages and health care costs can be used to calculate the ERC, including wages paid to employees working from home.

Large business:

If the business is an eligible employer, wages paid to employees that continue to work from home should not be considered qualified wages.

See more from the IRS here.

If a business was started in 2020, that business could qualify for the ERC in calendar year 2020 by a full or partial suspension due to a government order. The gross receipts comparison could not be completed in 2020 absent gross receipts from 2019. In 2021, the gross receipts test can be applied comparing a calendar quarter in 2021 to the same calendar quarter in 2020.

The total ERC benefit per employee can be up to $26,000 ($5,000 in 2020 and $7,000 per quarter for the first three quarters in 2021).

For 2020, an eligible employer is entitled to a refundable credit equal to 50% of qualified wages paid from March 13, 2020 through December 31, 2020, inclusive of qualified health plan expenses (up to $10,000 in qualified wages per employee, resulting in a maximum credit of $5,000).

For 2021, an eligible employer is entitled to a credit equal to 70% of qualified wages paid from January 1, 2021 through September 30, 2021 (up to $10,000 in qualified wages per employee per quarter, resulting in a maximum credit of $7,000 per quarter).