Congress acted quickly during the worldwide COVID-19 pandemic to provide hiring and other economic incentives to employers. One particularly helpful relief provision—the employee retention credit (“ERC”)—provided employers with potentially refundable credits for wages that they paid to their employees during certain periods of 2020 and 2021.
Regrettably, Congress’s swift action and subsequent tinkering with the rules and requirements of the ERC left many employers confused as to whether they qualified for the credit in any given calendar quarter. In an attempt to reduce this confusion, this article provides a primer on the ERC including certain applicable rules and eligibility requirements to claim the ERC.
Congress originally enacted the ERC relief provisions on March 27, 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. No. 116-136 (the “CARES Act”). Congress later revised the ERC rules through enactment of: (1) The Taxpayer Certainty and Disaster Relief Act of 2020, Pub. L. No. 116-260 (the “Relief Act”) (enacted December 27, 2020); (2) the American Rescue Plan Act of 2021, Pub. L. No. 117-2 (the “Rescue Plan Act”) (enacted March 11, 2021); and (3) the Infrastructure Investment and Jobs Act, Pub. L. No. 117-58 (the “Infrastructure Act”) (enacted November 15, 2021). The IRS issued guidance on the ERC through FAQs and various Notices.
At its basics, eligible employers that qualify for the ERC are...
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