--- title: Your Guide to the 2021 COVID-19 Employee Retention Tax Credit | Maximus description: In 2021, new amendments to the CARES Act now offer substantially more aid to employers with an employee retention credit. --- [![maximus-logo](https://maximus-tces.com/hubfs/Logo/maximus-logo.svg) ![maximus-logo](https://maximus-tces.com/hubfs/Logo/maximus-logo.svg)](https://maximus-tces.com) [![maximus-logo](https://maximus-tces.com/hubfs/Logo/maximus-logo.svg)](https://maximus-tces.com) - [Tax Credits](https://maximus-tces.com/tax-credits) - [Work Opportunity Tax Credit (WOTC)](https://maximus-tces.com/work-opportunity-tax-credit) - [Location-based Tax Incentives](https://maximus-tces.com/location-benefits) - [I-9 Management](https://maximus-tces.com/i-9-management) - [MAXOutreach](https://maximus-tces.com/maxoutreach) - [About Maximus](https://maximus-tces.com/about) - Resources - [Insights](https://maximus-tces.com/insights) - [Case Studies](https://maximus-tces.com/case-studies) - [WOTC Savings Calculator](https://maximus-tces.com/wotc-calculator) - [I-9 Potential Fines Calculator](https://maximus-tces.com/i-9-potential-fines-calculator) - [Tax Credits](https://maximus-tces.com/tax-credits) - [Tax Credits](https://maximus-tces.com/tax-credits) - [Work Opportunity Tax Credit (WOTC)](https://maximus-tces.com/work-opportunity-tax-credit) - [Location-based Tax Incentives](https://maximus-tces.com/location-benefits) - [I-9 Management](https://maximus-tces.com/i-9-management) - [MAXOutreach](https://maximus-tces.com/maxoutreach) - [About Maximus](https://maximus-tces.com/about) - Resources - [Insights](https://maximus-tces.com/insights) - [Case Studies](https://maximus-tces.com/case-studies) - [WOTC Savings Calculator](https://maximus-tces.com/wotc-calculator) - [I-9 Potential Fines Calculator](https://maximus-tces.com/i-9-potential-fines-calculator) [Contact an expert](https://maximus-tces.com/contact) #### What You Need to Know # COVID-19 Employee Retention Tax Credit In 2021, new amendments to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) now offer substantially more aid to employers.    Since it was enacted on March 27, 2020, the CARES Act provided an employee retention credit to employers that kept employees on their payroll amid an economic hardship due to the novel COVID-19. ## ERTC Overview The employee retention tax credit is a broad based refundable tax credit designed to encourage employers to keep employees on their payroll. Exceptions and limitations Qualified payments limited to $10,000 per employee per quarter through October 1, 2021. ERTC is not available in the same quarter you are taking WOTC for an employee. Wages must not be more than the amount the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period. Qualified ERTC wages cannot be wages paid through PPP funds. Complete exclusion from ERTC due to receipt of PPP loan has been eliminated. Limitations with WOTC, Employer Credit for Paid Family and Medical Leave, Credit for Required Paid Sick Leave & Credit for Required Paid Family Leave apply. #### How much is the credit? 70% of qualified wages per employee (max $7,000 per quarter) #### Who qualifies? All employers regardless of size that meet one of two qualifications: 1\. Business was fully or partially suspended by government order due to COVID-19 during the calendar quarter OR 2\. The employer's gross receipts are down 20% or more in comparison to the same quarter in 2019 #### What wages qualify? up to $10,000 per quarter in wages and healthcare costs paid between January 1, 2021 and October 1, 2021 to employees who did not work during that period. (If 500 employees or fewer, the credit is based on wages paid to all employees regardless of whether they actually worked or not.) #### How will I be paid? Offset of all withheld federal employment taxes: Employer FICA and Medicare Employee FICA and Medicare Federal Income Tax Withholding Excess credit will be refunded: Cash refunds Advance tax payments ## Frequently Asked Questions   What businesses qualify for the employee retention credit? Is the credit limited to businesses affected by COVID-19? Does the credit only apply to small businesses? Do I have to wait until my business files its 2020 tax return to claim the credit? What if the business claims the FFCRA credit for mandatory sick leave and/or family leave? Does the business have to pay back the credit? Any employer, regardless of size, is eligible for the credit during calendar year 2021 if the business: (1) is fully or partially suspended due to a governmental order related to COVID-19, or (2) experiences a significant decline in gross receipts (i.e., down 20% or more in comparison to the same quarter in 2019). The credit also applies to tax-exempt organizations if the operation of the organization is fully or partially suspended due to the circumstances described in (1) above. The credit generally does not apply to governmental employers, including the U.S. Government, state and local governments, or any agency of the foregoing. Yes. The credit only applies to qualified wages paid by a business whose operations have been fully or partially suspended pursuant to a governmental order related to COVID-19, or have experienced a significant decline (i.e., down 20% or more in comparison to the same quarter in 2019) in gross receipts, as described above, during the period from January 1, 2021 through October 1, 2021. No. For eligible employers with 500 or fewer full-time employees, the credit applies to all employee wages. In contrast, eligible employers with greater than 500 full-time employees may only take into account qualified wages paid to employees when they are not providing services due to a governmental order related to COVID-19. No. The tax credit may be claimed against the employer portion of employment taxes, including Social Security and Railroad Retirement payroll taxes. To the extent the credit exceeds the employer portion of employment taxes due, the credit is treated as an overpayment and is refundable to the employer. The IRS is expected to provide guidance regarding the process for claiming the credit and receiving the refund. \*Under the Consolidated Appropriations Act, 2021, employers that received or receives a PPP loan are no longer prohibited from claiming the ERTC. You can claim the ERTC related to qualified wages on your 4th quarter 2020 Form 941. If the business claims the FFCRA credit for mandatory sick leave and/or family leave, the wages associated with the FFCRA credit are not eligible as qualified wages for the employee retention credit. This prevents both credits from applying to the same wages paid by an employer. No. As long as the employer meets the requirements for the credit (described in the Q&As above), the employer does not have to repay the credit or the resulting refunds. ## Frequently Asked Questions   What businesses qualify for the employee retention credit? Any employer, regardless of size, is eligible for the credit during calendar year 2021 if the business: (1) is fully or partially suspended due to a governmental order related to COVID-19, or (2) experiences a significant decline in gross receipts (i.e., down 20% or more in comparison to the same quarter in 2019). The credit also applies to tax-exempt organizations if the operation of the organization is fully or partially suspended due to the circumstances described in (1) above. The credit generally does not apply to governmental employers, including the U.S. Government, state and local governments, or any agency of the foregoing. Is the credit limited to businesses affected by COVID-19? Yes. The credit only applies to qualified wages paid by a business whose operations have been fully or partially suspended pursuant to a governmental order related to COVID-19, or have experienced a significant decline (i.e., down 20% or more in comparison to the same quarter in 2019) in gross receipts, as described above, during the period from January 1, 2021 through October 1, 2021. Does the credit only apply to small businesses? No. For eligible employers with 500 or fewer full-time employees, the credit applies to all employee wages. In contrast, eligible employers with greater than 500 full-time employees may only take into account qualified wages paid to employees when they are not providing services due to a governmental order related to COVID-19. Do I have to wait until my business files its 2020 tax return to claim the credit? No. The tax credit may be claimed against the employer portion of employment taxes, including Social Security and Railroad Retirement payroll taxes. To the extent the credit exceeds the employer portion of employment taxes due, the credit is treated as an overpayment and is refundable to the employer. The IRS is expected to provide guidance regarding the process for claiming the credit and receiving the refund. \*Under the Consolidated Appropriations Act, 2021, employers that received or receives a PPP loan are no longer prohibited from claiming the ERTC. You can claim the ERTC related to qualified wages on your 4th quarter 2020 Form 941. What if the business claims the FFCRA credit for mandatory sick leave and/or family leave? If the business claims the FFCRA credit for mandatory sick leave and/or family leave, the wages associated with the FFCRA credit are not eligible as qualified wages for the employee retention credit. This prevents both credits from applying to the same wages paid by an employer. Does the business have to pay back the credit? No. As long as the employer meets the requirements for the credit (described in the Q&As above), the employer does not have to repay the credit or the resulting refunds. ## We're here to help you navigate the ins and outs of the Employee Retention Tax Credit. Contact us today to maximize your COVID-19 credit. [![Get in touch with an expert](https://no-cache.hubspot.com/cta/default/457810/e32550c3-4e01-4598-8a59-1c68b1a93a76.png)](https://cta-redirect.hubspot.com/cta/redirect/457810/e32550c3-4e01-4598-8a59-1c68b1a93a76) [![maximus-logo-white](https://maximus-tces.com/hubfs/maximus-logo-white.svg)](https://maximus-tces.com) At Maximus Tax Credit and Employer Services, we’ve been helping businesses maximize tax credits and employer incentives since 1978. We specialize in administering the Work Opportunity Tax Credit (WOTC) and other federal, state, and local tax credit programs across all 50 states. 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