There have been many relief options doled out in the past few weeks to help small businesses who are struggling. By and large, many of these relief options have emphasized employee retention. With much attention on the Payroll Protection Program and Economic Injury Disaster Loans as of late, some are not aware of the Employee Retention Tax Credit also available to employers. To those who were unable to secure funding through the fore-mentioned programs, the Employee Retention Credit might be worth considering.

Here is what you need to know:


  • Equal to 50% of the qualified wages (up to $10,000 per employee) an eligible employer pays to employees after March 12, 2020 and before January 1, 2021.
  • Employers can gain immediate access to the credit by reducing employment tax deposits
  • An advance payment of the credit may be requested for those employers who do not have enough in employment tax deposits to cover the credit
  • Not eligible to employer’s who received a Small Business Interruption Loan under the Paycheck Protection Program
  • Credit is taken against the employer’s share of social security tax

Who is Eligible?

Employers are eligible for the credit if they experience either:

  • Full or partial suspension of business operations during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19
  • A significant decline in gross receipts beginning on the first day of the calendar quarter for which gross receipts are less than 50% of the prior years’ receipts during the same period
  • Businesses who averaged 100 or more full-time employees in 2019 can include up to $10,000 per employee paid to those that are not providing services because of the interruption
  • Those with an average of 100 of fewer full-time employees in 2019 can include up to $10,000 per employee during the period of decline regardless of whether they are providing services or not

Key Takeaways

  • This is only for those who have been unable to obtain funding through the Payroll Protection program
  • If your business has effectively shut down, you can continue to pay employees and get this credit
  • Determining your eligibility and claiming the advance payment can be tricky. The IRS recommends using a reputable tax advisor to help avoid errors and processing delays

Contact Us

For assistance, call one of our Innovative CPA Group professionals at 203-489-0612 or contact us online.