Employee Retention Tax Credit Facts and Resources

Date: February 17, 2021

Here’s How Your Business Can Take Advantage of a Generous Tax Refund 

If you are a small business owner, you may be eligible to take advantage of the recently expanded Employee Retention Tax Credit (ERTC). This refundable, advanceable tax credit is available for wages paid in 2020 and in the first two quarters of 2021. 

The Consolidated Appropriations Act (CAA), a new federal law enacted in December, extended and expanded the ERTC to offer substantial savings to any eligible small business owner. For Q1 and Q2 2021, the ERTC offers savings of up to $7,000 per employee, per quarter, and an annual max of up to $14,000 per employee, while for 2020, the program offers $5,000 per employee.

The tax credit is available to small businesses (100 or fewer employees for 2020, 500 or fewer employees for 2021) that experienced a government shutdown during the COVID-19 pandemic, as well as any business that saw a substantial drop in gross receipts compared to the same quarter in 2019 (50% or greater drop in 2020, 20% or greater drop in 2021). 

You can also take advantage of the ERTC in addition to first-round and second-round Paycheck Protection Program (PPP) loan. The only restriction on using these programs together, is that you cannot claim ERTC refunds on wages paid by a PPP loan. 

However, this tax credit opportunity is unfamiliar and appears to be severely underused by many small business owners. According to NFIB’s research: 

  • Only 4% of small business owners said they are very familiar with the program. Another 32% said they are somewhat familiar. 
  • About 8% of owners utilized the ERTC in 2020. 
  • About 10% of owners plan to take advantage of the tax credit in Q1 and Q2 of 2021. 
  • Nearly half (47%) of owners report that they might take advantage of the tax credit in 2021. 

To help employers to understand their eligibility for the ERTC and the potential advantages of the program, NFIB has developed a series of resources for small business owners:  

NFIB does not provide legal, tax, or accounting advice, so please see your bookkeeper, CPA or tax professional for advice specific to your business’ eligibility for the ERTC. If you don’t have a CPA or tax professional, you can find one in your area here or here. 

Related Content: Analysis | Coronavirus | National | Taxes

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