What is the Employee Retention Credit?
This is a benefit provided for by the CARES Act that permits eligible employers to receive a credit against their employment taxes for a portion of the wages paid to employees and the cost of maintaining a healthcare plan per employee despite certain economic hardships.
Can I receive the Employee Retention Credit if I also receive a Paycheck Protection Program (PPP) loan?
No. The CARES Act provides that the credit is not available to employers that receive a PPP loan.
Does it matter how many employees I have?
Yes. While all non-government (federal, state, and local government employers are excluded from the credit) employers that do not take a PPP loan may be able to receive a credit, employers that averaged greater than 100 full-time employees in 2019 are eligible for fewer benefits than employers that averaged 100 full-time employees or less during this same time period. Internal Revenue Code aggregation rules treating affiliated employers as one employer apply for purposes of counting the number of employees.
What makes an employer eligible for the Employee Retention Credit?
An employer is eligible for the Employee Retention Credit if it is in business in 2020 and it either suffers a full or partial shutdown because of a government order or a “significant decline” in revenue. For these purposes, a “significant decline” means the first quarter for which there is a 50% reduction in gross receipts compared to the same quarter in the prior year and ends with the quarter following the first quarter in which gross receipts are greater than 80% of the gross receipts in the same quarter in the prior year.
How much is the credit?
The credit is equal to 50% of the “qualified wages” with respect to each employee for each applicable quarter. For employers that averaged greater than 100 full-time employees in 2019, qualified wages mean wages paid to an employee who is NOT providing services because of a COVID-19-related full or partial shutdown or a significant decline in gross receipts. For employers that averaged 100 full-time employees or less in 2019, qualified wages mean wages paid to ANY employee during any full or partial shutdown or any quarter in which there was a significant decline in gross receipts. Qualified wages for each employee are capped at $10,000 and only cover wages paid after March 12, 2020, and before January 1, 2021. Further, no employee’s wages for determining the credit can exceed the wages he/she received in the 30 days immediately prior. Qualified wages also include qualified health plan expenses that are properly allocable to the wages on a pro rata basis
Employers cannot receive a “double credit” under the CARES Act if they are already receiving a credit under the Families First Coronavirus Response Act (FFCRA) for wages and healthcare expenses paid to its employees.
How is the credit paid to me?
The credit is applied against an employer’s share of social security taxes. If the amount of the credit is greater than the social security taxes owed for the quarter, the excess amount is treated as an overpayment, meaning that it is applied to offset other employment tax liabilities and related offsets and then refunded to the employer. In order to receive these funds in a timelier manner, employers are permitted to access federal employment taxes, including withheld taxes, deposited with the IRS. Employers may also request an advance from the IRS.
For more COVID-19 related information, check out our resources page here. If you have any questions about the Employee Retention Credit, contact Russell Berger at or Gabriel Celii at
ABOUT RUSSELL BERGER
As an accomplished labor and employment attorney and Practice Group Director, Mr. Berger provides business counsel to employers on employee matters and is well-versed in litigating in both state and federal courts. Russell Berger is the trusted legal counsel every business owner needs to feel confident in their decision-making and secure with their assets. As a Practice Group Director at Offit Kurman, Mr. Berger has direct experience with managing other managers, which he draws from in advising his clients. He is a pragmatic problem-solver that works efficiently and tirelessly to present his clients the best possible solutions to their most complicated issues. He represents employers, businesses, and professionals in employment disputes across the nation.
ABOUT GABRIEL CELII
Mr. Celii devotes his practice to representing businesses and municipal entities navigating labor and employment disputes ranging from wage and hour litigation and work place discrimination defense to labor negotiations and the resolution of grievances. During his representation of Philadelphia-area Townships and Counties, he has successfully defended claims brought against public officials and advised municipalities on the drafting of local ordinances, such as Police Pension DROP amendments.
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