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

Author: XpertHR Editorial Team

When to Use

The Coronavirus Aid, Relief and Economic Security Act (CARES Act), as amended by the Consolidated Appropriations Act, 2021 (CAA), created the Employee Retention Credit (ERC). The ERC is a payroll tax credit 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.

The ERC applies to qualified wages paid during the period from March 13, 2020, through December 31, 2021, as extended by the American Rescue Plan Act of 2021 (ARPA). However, the original credit may be claimed retroactively (e.g., for the period March 13, 2020, through December 31, 2020) on IRS Form 941-X if an employer concludes later that it is eligible.

Through June 30, 2021, the ERC is a refundable credit taken against the employer share of Social Security taxes. It is 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, beginning July 1, 2021, under the ARPA, the ERC converts to a credit against the employer share of Medicare taxes. Although the credit remains 50% of qualified wages and/or an allocable share of health plan expenses, it increases to $10,000 per employee per quarter. Certain hard hit employers are entitled to more generous relief.

An employer impacted by the COVID-19 crisis may use this checklist to determine whether it is eligible for the ERC and, if eligible, to properly claim the credit and ensure it assembles and maintains all records required by the CARES Act. Employers should complete the following steps in sequential order.

Customizable Checklist