Don’t overlook CARES Act tax credit for retaining employees during pandemic

The employee retention credit (ERC) is a fully refundable tax credit against payroll taxes originally enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Its purpose was to encourage employers to continue paying employees despite financial hardship caused by the COVID-19 pandemic. Even if your quarterly Forms 941 (the federal tax returns for employers) have already been filed, you may still be able to amend them to take advantage of the credit.

How complicated ERC rules work

The rules surrounding the ERC are quite complex, in part because the regulatory framework stems from multiple statutes and IRS notices and the agency hasn’t provided clear, sufficient guidance. Furthermore, some of the rules have changed since their inception. For example, the Infrastructure Investment and Jobs Act enacted on November 15, 2021, retroactively eliminated the credit for wages paid after September 30, 2021.

Eligibility. Your business may be eligible for the ERC if it experienced any of the following: