What Documentation is Needed for the Employee Retention Credit (ERC) ?

The Employee Retention Credit (ERC) is a tax credit available for small business owners, LLC’s, S-Corps, or 1099 employees. Similar to the $1,200 stimulus check taxpayers received, this credit is designed to help small businesses during these trying times.

The ERC is not a loan, it is a tax credit, meaning that it does not have to be repaid. In the first stimulus, businesses were only allowed to claim one of the PPP or the ERC, not both. That rule has been changed, and now businesses can claim both funding opportunities, providing much-needed relief and help.

The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021.

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What forms do I need to apply for the Employee Retention Credit (ERC)?

1. Forms 941 – Employer’s Quarterly Federal Tax Return

2. Forms 7200 – Advance Payment of Employer Credits Due to COVID-19

3. Form 8655 – Reporting Agent Authorization

4. PPP Applications and Forgiveness, as applicable

5. Forms of any other COVID-19 related grants, credits previously applied for (PPP, section 7001 & 7003 of FFCRA and section 45S of the Code – paid family and medical leave credits)

6. Q1, Q2, Q3, Q4 2019 Financials

7. Q1, Q2, Q3, Q4 2020 Financials

8. Q1 2021 Financials

9. Government order to shutdown or suspend operations, if applicable

10. Power of Attorney

11. General release of liability

12. Client Services Agreement and Fee Arrangement

The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. Note: You must keep all records for four years.

Apply Now for the ERC

Sources: 

IRS Notice 2021-20

https://www.irs.gov/newsroom/irs-provides-guidance-for-employers-claiming-the-employee-retention-credit-for-2020-including-eligibility-rules-for-ppp-borrowers