In order to be eligible for the ERC program, a company must meet either one of the following criteria, but not both:
1. Reduction in Revenue
A reduction in revenue can result in a credit per quarter being affected. Specifically, if there is a decrease of at least 50% in your gross receipts for 2020 when compared to the same quarter in 2019, and a decrease of at least 20% in your gross receipts for 2021 when compared to the same quarter in 2019.
2. Impacted by Government Orders
If a governmental regulation has had a significant impact on your business operations, such as:
- Being required to fully or partially halt operations due to governmental regulations,
- Limiting capacity to adhere to social distancing guidelines mandated by governmental regulations,
- Being unable to acquire essential goods or materials from suppliers as they were mandated to halt operations due to governmental regulations,
- Governmental regulations mandating shelter-in-place preventing employees from reporting to work.
References
- Internal Revenue Service (IRS)
https://www.irs.gov/coronavirus/employee-retention-credit - The CARES Act
https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf - National Federation of Independent Business (NFIB)
https://www.nfib.com/content/legal-compliance/labor-law/the-employee-retention-tax-credit/ - What Is The Employee Retention Credit (ERC), And How Does The Program Work?
Forbes
https://www.forbes.com/sites/forbesfinancecouncil/2022/06/21/what-is-the-employee-retention-credit-erc-and-how-does-the-program-work/ - FAQs: Employee Retention Credit under the CARES Act
Internal Revenue Service (IRS)
https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act