--- title: What is the Employee Retention Tax Credit? - Ahola description: The Employee Retention Tax Credit is an important stimulus benefit that could provide substantial funding for your business to recover from pandemic declines. image: https://blog.ahola.com/hubfs/Imported_Blog_Media/canstockphoto33312584.jpg --- Start typing and press Enter to search * * # What is the Employee Retention Tax Credit? [Home](https://www.ahola.com/) » [News & Events](https://blog.ahola.com/what-is-the-employee-retention-tax-credit) » What is the Employee Retention Tax Credit? [2021-06-01%2013:57:28](2021-06-01%2013:57:28) ![](https://blog.ahola.com/hubfs/Imported_Blog_Media/canstockphoto33312584.jpg) ## What is the Employee Retention Tax Credit? By [ aholaadmin ](https://blog.ahola.com/author/aholaadmin)  Posted [ June 1, 2021](2021-06-01%2013:57:28)  In  [Payroll](https://blog.ahola.com/tag/payroll), [Benefits](https://blog.ahola.com/tag/benefits), [Human Resources](https://blog.ahola.com/tag/human-resources), [Managing COVID-19](https://blog.ahola.com/tag/managing-covid-19), [Employees](https://blog.ahola.com/tag/employees), [Hiring](https://blog.ahola.com/tag/hiring), [Time & Attendance](https://blog.ahola.com/tag/time-attendance) - - - - - ### What is the Employee Retention Credit (ERC)? The ERC is a benefit under the federal Covid-19 stimulus plan where businesses can receive funding through tax credits on their Federal Form 941 if they meet certain conditions in 2020 and 2021. It was originally passed under the [**CARES Act**](https://www.ahola.com/understanding-the-cares-act-employee-retention-credit/) in March 2020 and was extended with changes to the rules under the **Consolidated Appropriations Act** in December 2020 and was extended again under the [**American Rescue Plan Act**](https://www.ahola.com/american-rescue-plan-act-overview/) in March 2021. ### How does a business qualify for the Employee Retention Credit? A business may qualify if it experienced a suspension or shut-down of the business during any calendar quarter because of a governmental order due to COVID-19 or if it experienced a significant decline in gross receipts. - The rules for significant decline are different for 2020 and 2021. - For **2020**, a business qualifies if the gross receipts for any quarter are **down 50%** or more as compared to the same quarter of 2019. - For **2021,** a business qualifies if the gross receipts for any quarter are **down** **20%** or more as compared to the same quarter of 2019. - If a business meets the above conditions for any quarter and it continued to pay employees during that quarter, the business can receive tax credits applied to the qualified wages paid during the quarter. *Other qualifications must be met. ### If a business received a PPP loan, can the business also take the Employee Retention Credit? **Yes**. In 2020, businesses that received [**PPP loans**](https://www.ahola.com/ppp-loan-application-extended/) were automatically ineligible for the ERC.  At the end of 2020 with the Consolidated Appropriations Act, this was reversed.  Businesses that received PPP loans can take advantage of the ERC.  The only stipulation is that the same wages used for PPP forgiveness cannot be used for the ERC.  Businesses may amend their 2020 Form 941 returns if they qualify for the ERC. ### What quarters are eligible for the Employee Retention Credit? The Employee Retention Credit is available for Qtr 2 2020 through Qtr 4 2021. It applies to wages paid from **March 13, 2020 through December 31, 2021.  **NOTE:  Credits for March 13 through March 31, 2020 are reported on the Qtr 2 2020 Form 941. ### How are the credits calculated? For **2020**: For each quarter that the business is eligible, the employer gets a 50% credit against qualified wages paid to employees in that quarter up to $10,000 paid to each employee for the year. In **2020**, the maximum credit is **$5,000** **per employee for the year.** For **2021**: For each quarter that the business is eligible, the employer gets a 70% credit against qualified wages paid to employees in that quarter up to $10,000 paid to each employee in that quarter. In **2021**, the maximum credit is **$7,000** **per employee per quarter**. ### Are there rules that the business must meet when calculating the Employee Retention Credit? There are other rules that must be followed.  The employer should review the rules and/or work with their accountant to make sure the credits are calculated correctly. Some of the rules include the following: 1. If the business received a PPP loan, then the wages used toward forgiveness of the loan cannot be used for the ERC, 2. FFCRA wages cannot be used for the ERC, and 3. Wages paid to owners and related individuals cannot be used for the ERC. ### What should an Ahola client do if they think they may qualify for the Employee Retention Credit? The client should work with their accountant or internal business tax professional to determine eligibility and calculate the credit amounts per quarter. The client should send an email to **[CovidSupport@ahola.com](mailto:CovidSupport@ahola.com)** when they are ready to submit their credit amounts or if they have questions. ### Reply a Comment ## RELATED POSTS [![](https://blog.ahola.com/hubfs/canstockphoto95026575%20(1).jpg) ](https://blog.ahola.com/how-to-file-and-claim-the-employee-retention-tax-credit-with-form-941-x) [How to File and Claim the Employee Retention Tax Credit with Form 941-X](https://blog.ahola.com/how-to-file-and-claim-the-employee-retention-tax-credit-with-form-941-x) [![](https://blog.ahola.com/hubfs/Imported_Blog_Media/qtq80-NamCe0.jpeg) ](https://blog.ahola.com/form-i-9-compliance-and-basics) [Form I-9 Compliance and Basics](https://blog.ahola.com/form-i-9-compliance-and-basics) [![](https://blog.ahola.com/hubfs/canstockphoto95026575%20(1).jpg) ](https://blog.ahola.com/understanding-the-employee-retention-credit) [Understanding the Employee Retention Credit](https://blog.ahola.com/understanding-the-employee-retention-credit) ## SUBSCRIBE ### Recent posts - [Professionalizing HR Without Losing Your Family Culture ](https://blog.ahola.com/professionalizing-hr-without-losing-your-family-culture) - [Why Encouraging Employees to Take Summer Vacation Benefits Your Workplace ](https://blog.ahola.com/why-encouraging-employees-to-take-summer-vacation-benefits-your-workplace) - [Ahola Named a 2026 Top Workplace — Six Years Running! ](https://blog.ahola.com/ahola-named-a-2026-top-workplace) - ### Topics - [Affordable Care Act (13)](https://blog.ahola.com/tag/affordable-care-act) - [Benefits (223)](https://blog.ahola.com/tag/benefits) - [Cybersecurity (1)](https://blog.ahola.com/tag/cybersecurity) - [Employee Engagement (255)](https://blog.ahola.com/tag/employee-engagement) - [Employees (603)](https://blog.ahola.com/tag/employees) - [Family Business Insights (10)](https://blog.ahola.com/tag/family-business-insights) - [Hiring (282)](https://blog.ahola.com/tag/hiring) - [Human Resources (645)](https://blog.ahola.com/tag/human-resources) - [Laws/Policies (26)](https://blog.ahola.com/tag/laws-policies) - [Managing COVID-19 (153)](https://blog.ahola.com/tag/managing-covid-19) - [News Release (56)](https://blog.ahola.com/tag/news-release) - [Offboarding (3)](https://blog.ahola.com/tag/offboarding) - [onboarding (7)](https://blog.ahola.com/tag/onboarding) - [Payroll (428)](https://blog.ahola.com/tag/payroll) - [Recruiting (142)](https://blog.ahola.com/tag/recruiting) - [Safety (121)](https://blog.ahola.com/tag/safety) - [Tax Compliance (230)](https://blog.ahola.com/tag/tax-compliance) - [Time & Attendance (124)](https://blog.ahola.com/tag/time-attendance) - [Training & Development (214)](https://blog.ahola.com/tag/training-development) - [Trending Topic (75)](https://blog.ahola.com/tag/trending-topic) - [Uncategorized (1)](https://blog.ahola.com/tag/uncategorized) - [Webinars (69)](https://blog.ahola.com/tag/webinars) - [Workers Comp (1)](https://blog.ahola.com/tag/workers-comp) [see all topics](https://blog.ahola.com/what-is-the-employee-retention-tax-credit#) ### GENERAL DISCLAIMER This blog is for informational and educational purposes only. 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