The COVID-19 pandemic has had a significant impact on businesses and the economy, and one way the government has attempted to mitigate the effects is through the Employee Retention Credit (ERC). This credit is designed to encourage businesses to keep employees on their payroll and help prevent layoffs during the pandemic. In this article, we will explore the details of the ERC and how it has been used to support businesses in New York during the COVID-19 pandemic.
What is the Employee Retention Credit?
The ERC is a credit that is available to eligible employers who are experiencing financial hardship due to the COVID-19 pandemic. The credit is equal to 50% of qualified wages paid to employees, up to a maximum of $5,000 per employee per year. The credit is available for wages paid between March 13, 2020 and December 31, 2020, and it can be claimed on the employer’s quarterly employment tax return or on an amended return for the first two quarters of 2020.
To be eligible for the ERC, an employer must meet one of the following two criteria:
- The employer’s business was fully or partially suspended by a government order due to COVID-19. This could include a mandatory closure or a reduction in capacity.
- The employer experienced a significant decline in gross receipts. To meet this criteria, the employer’s gross receipts must be less than 50% of the gross receipts for the same quarter in the previous year.
Qualified wages are those wages that are paid to an employee while they are not providing services due to one of the above reasons. For example, if an employee is unable to work because their place of employment is closed due to COVID-19, the wages paid to that employee would be considered qualified wages.
The ERC is available to both small and large employers, and it is not limited to businesses in certain industries. However, the credit is not available to employers who receive a loan through the Paycheck Protection Program (PPP).
How has the ERC been used in New York during the COVID-19 pandemic?
New York has been one of the states hardest hit by the COVID-19 pandemic, and businesses in the state have faced significant challenges as a result. The ERC has been an important tool for many businesses in New York to help them keep their employees on the payroll and avoid layoffs.
One way that the ERC has been used in New York is by helping businesses to cover the cost of providing paid leave to employees who are unable to work due to COVID-19. Many businesses in New York have been required to close or reduce capacity due to government orders, and the ERC has helped to offset the cost of paying employees during this time.
The ERC has also been used by businesses in New York that have experienced a significant decline in gross receipts due to the pandemic. For example, a restaurant that has seen a decrease in customer traffic due to social distancing measures could potentially qualify for the ERC.
In addition to the ERC, the federal government has also implemented other measures to support businesses in New York during the COVID-19 pandemic. These measures include the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.
Conclusion
The Employee Retention Credit has been an important tool for businesses in New York to help them keep their employees on the payroll and avoid layoffs during the COVID-19 pandemic. It has been used to cover the cost of providing paid leave to employees who are unable to work due to the pandemic and to offset the financial impact of a significant decline in gross receipts.
