The Employee Retention Tax Credit (ERTC) is a credit that provides tax relief for companies that lost revenue in 2020 and 2021 due to COVID-19. It rewards businesses who kept employees during the COVID-19 pandemic, up to $26,000 per employee.

To qualify for the credit, your business or nonprofit organization must meet at least one of the following requirements in the calendar quarter they want to use the credit: The business was fully or partially closed due to a government order stemming from the COVID-19 pandemic, or The business had a decline in gross receipts

To qualify as partially suspended, an employer's business operations must have been limited due to a federal, state, or local order, proclamation, or decree that affected the employer's operations. An example of a partially suspended business would be a restaurant that could no longer welcome dine-in customers but continued to provide carry-out or delivery services

For wages paid in 2020, the tax credit is worth 50% of qualified employee wages. The highest amount that would be considered qualified employee wages for any one employee is $10,000 for the entire year. Following that math, the maximum credit a business can get per qualified employee is $5,000 (i.e., 50% of $10,000). For wages paid in 2021, the tax credit is higher: 70% of qualified employee wages. The highest amount of qualified wages paid that would be considered for any one employee is also larger: $10,000 per month. Therefore, the maximum credit a business can receive for 2021 is considerably larger than for 2020.

Qualified wages are compensation provided to employees during an eligible period. An eligible period is either: the time during which the trade or business is fully or partially suspended by governmental order, or for 2020, any calendar quarter during which gross receipts are 50% less than the amount received during the same quarter of 2019; for 2021, any calendar quarter during which gross receipts are 20% less than the same quarter of 2019.

While the period covered by the ERTC is over, it is not too late to retroactively receive your tax credit. You have three years after your initial tax filing to fill out Form 941-X. So, for those trying to claim their 2020 ERTC, which they likely would have filed in early 2021 as part of their 2020 taxes, they have until the same date in 2024.