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Coronavirus (COVID-19): Claim the Employee Retention Credit (ERC) Checklist

Author: XpertHR Editorial Team

When to Use

The Employee Retention Credit (ERC) is a refundable payroll tax credit that was designed to help eligible employers keep workers on their payrolls, increase available cash flow and provide economic stability despite the financial hardship caused by the coronavirus (COVID-19) pandemic. It first became available on March 13, 2020.

The Coronavirus Aid, Relief and Economic Security Act (CARES Act), as amended by the Consolidated Appropriations Act, 2021 (CAA) and the American Rescue Plan Act of 2021 (ARPA), created and modified the ERC. However, the Infrastructure Investment and Jobs Act (IIJA; P.L. 117-58) terminated the ERC for most employers on September 30, 2021, and for recovery startup businesses on December 31, 2021.

Nevertheless, all eligible employers may still claim the original and amended credit retroactively - for the period March 13, 2020, through September 30, 2021, for most employers; or through December 31, 2021, for recovery startup businesses - on IRS Form 941-X.

Through 2020, the ERC applied against the employer share of Social Security taxes. It was equal to 50% of the qualified wages and/or an allocable share of health plan expenses, up to $10,000 per employee per year.

However, for the first three quarters of 2021, the CAA increased the ERC to 70% of qualified wages and health benefits per employee, per quarter, and the maximum wages against which the credit could be taken increased to $10,000 per employee, per quarter, for most employers.

In addition, as of July 1, 2021, under the ARPA, the ERC applies against the employer share of Medicare taxes, with certain hard-hit employers entitled to more generous relief.

An employer impacted by the COVID-19 crisis may use this checklist to determine eligibility for the ERC, to properly claim the credit and to ensure it assembles and maintains all records required by the CARES Act. Employers should complete the following steps in sequential order. However, because the credit has expired, all employers must file Form 941-X to claim it retroactively.

Customizable Checklist