What is Employment Retention Credit or ERC?


At the onset of the pandemic, many businesses collapsed and employees were left without jobs. In order to protect their economy, the government created the Employment Retention Credit (ERC) program. ERC was a program implemented as a part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed in 2020 by Congress to encourage employers to keep their workers on the payroll. The Paycheck Protection Program  (PPP) was a loan program implemented by CARES Act at the same time, and it grabbed all media attention. However, in fact, ERC can be more significant to an employer than PPC.

Like any other program, ERC too comes with some eligibility criteria to make sure that the benefits go to those who really deserve it. However, the eligibility criteria for ERC are often misinterpreted, and most people disqualify themselves for ERC. Therefore, it would be better to find an erc specialist for Texas businesses and check whether you qualify for ERC.

Who Can Claim the Employee Retention Tax Credit?

  • You fully or partially suspended business operations during a calendar quarter because of a governmental COVID order

If your business was fully or partially suspended due to government guidelines during the COVID, then you can claim the ERC. In other words, if the operation of your business was affected by government-imposed COVID restrictions and you had to partially or fully cut down operations, then you can claim the ERC.

Here are some businesses that had to partially suspend their operations:

  • Transportation companies
  • Restaurants and bars
  • Fitness centers, gyms, and spas
  • Construction and manufacturing

Notice that the business listed above are only some examples of the business affected by COVID and ERC is not restricted to those businesses only. If your business was anyway affected by COVID restriction, then it would be worth checking whether your business qualifies for ERC.

  • Your gross receipts declined significantly in a quarter

If your gross receipts declined significantly in a quarter, then you can qualify for ERC. In short, according to the 2020 CARES Act, if your gross receipts dropped to 50%  when compared to the same quarter in 2019, then you can claim the ERC. However, now a drop of even 20% in gross receipts is considered significant.

Is ERC Taxable Income?

No, ERC is not an income. So, you won’t have to pay any taxes