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The Employee Retention Credit or ERC is found in the CARES Act in Section 2301. The ERC is designed to help businesses keep employees on payroll.
The credit is available to employers, no matter the size of the business. Unlike some of the other relief, there is no cap on the number of employees. The average number of employees in 2019 will, however, affect how the credit is calculated. If you have more than 100 full-time employees, you would include wages paid to employees when they are not providing services due to a government order related to COVID-19. If you have 100 or fewer full-time employees, all employee wages qualify for the credit, even if the employee is not providing services.
Most (business) employers are eligible for this relief, including corporations, LLCs, S corporations, partnerships, and sole proprietors who pay wages. But there are exceptions. Self-employed individuals are not eligible for the credit for their self-employment services or earnings; and Small businesses that take out a Small Business Interruption Loan (SBIL) under the Paycheck Protection Program (PPP) are not eligible for the credit.
To qualify, employers must fall into one of two categories. Your business is wholly or partially suspended by government order due to COVID-19 (like a stay-at-home or non-essential business order) during the quarter. Or your gross receipts for 2020 are below 50% of the comparable quarter in 2019.
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