The Employee Retention Credit (ERC) is a tax credit available to employers who have experienced economic hardship due to the COVID-19 pandemic.
The ERC was established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and has been extended through 2021. In this article, we will review the eligibility requirements for the ERC in the state of New York.
To be eligible for the ERC, an employer must meet the following criteria:
- The employer must have been in operation on March 12, 2020.
- The employer must have experienced a full or partial suspension of operations due to an order from a governmental authority, or the employer must have experienced a significant decline in gross receipts.
- The employer must have employed an average of fewer than 500 full-time employees in 2019.
If an employer meets these eligibility requirements, they may be able to claim the ERC for any wages paid to employees during the covered period. The covered period varies depending on the employer’s situation. For employers who experienced a full or partial suspension of operations, the covered period is the period from the date of the suspension until the date the operations resumed. For employers who experienced a significant decline in gross receipts, the covered period is the first two quarters of 2020, or the first quarter of 2021 if the employer did not experience a significant decline in gross receipts in 2020.
The amount of the ERC that an employer can claim is based on the wages paid to employees during the covered period. The ERC is equal to 50% of the qualified wages paid to each employee, up to a maximum of $5,000 per employee per year.
Qualified wages include the wages paid to an employee for the hours they are not providing services due to the suspension of operations or significant decline in gross receipts.
Employers in New York who are eligible for the ERC can claim the credit by completing Form 7200 and attaching it to their federal income tax return. Employers may also be able to claim the credit by reducing their federal payroll tax deposits or by requesting an advance payment of the credit from the IRS.
In conclusion, the Employee Retention Credit is a valuable resource for employers in New York who have been affected by the COVID-19 pandemic. By meeting the eligibility requirements and properly claiming the credit, employers can help offset the financial impact of the pandemic and retain their valuable employees.
