How to Apply for Employee Retention Tax Credit - ERTC Application

ERTC Application

Due to the COVID-19 pandemic many people are asking about how to apply for employee retention tax credit. In reaction to the COVID-19 pandemic, the U.S. government passed the CARES Act in March 2020 to help people and businesses immediately. The virus caused a nationwide lockdown, which hurt companies a lot and has effects still being felt today.

ERTC Application

The ERTC application procedure might differ from one taxpayer to the next, check in with a tax pro to ensure you're maximizing your refund by claiming every credit and deduction to which you're entitled. Here are the steps in applying ERTC:

Determine your Eligibility

Please check whether your business meets the eligibility criteria for the ERTC. Companies must have seen a significant sales drop or closed entirely or partially due to the COVID-19 outbreak.

Calculate the Credit

Find out how much of a credit you might expect to receive by reviewing the guidelines provided by the IRS. The credit amount can vary based on the number of employees and their wages.

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Fill out the Necessary Forms

You must complete Form 941, the Employer's Quarterly Federal Tax Return, to claim the ERTC. If you have filed Form 941 for the applicable quarter, you can claim the credit on the next quarterly return.

Submit the Forms

Once you have completed Form 941, you can submit it to the IRS. If you are filing electronically, you can use the IRS e-file system. If you offer a paper return, you can mail it to the IRS.

Keep Records

Keep accurate records of all the calculations and documents related to your ERTC claim. This includes documentation of your business's eligibility, the amount of credit claimed, and any supporting information.

ERTC Updates

Update on the Employee Retention Tax Credit (ERTC) before its September 2021 deadline:

  • The conclusion of the ERTC's original term has been pushed out to December 31, 2021. Qualifying businesses can submit a credit claim for wages paid between January 1, 2021, and December 31, 2021.
  • The credit increases: The maximum credit per employee in 2021 is $28,000, up from $5,000 in 2020.
  • Despite being qualified for the ERTC, businesses that have taken out a Paycheck Protection Program (PPP) loan cannot use those funds to pay employee salaries, thereby forfeiting the credit.

Who are the Qualifiers for the Employee Retention Tax Credit

Due to evolving laws surrounding COVID-19, the ERTC's prerequisites have developed. The following constituted ERTC eligibility as of the cutoff date of September 2021:

  • For the entire or a portion of any calendar quarter in 2020, business operations were halted following government orders associated with COVID-19, or
  • During the calendar quarter, the company's gross receipts dropped significantly, falling by at least 50% compared to 2019. The bar for a substantial drop in gross collections in 2021 has been reduced to 20%.

Even with potentially still qualifying for the ERTC, enterprises that have taken out a Paycheck Protection Program (PPP) loan cannot claim the credit for wages paid with PPP funds.

Furthermore, other limitations and conditions may apply, depending on the relevant legislation and IRS guidelines. To know more about the ERTC, you should talk to a tax expert or check the IRS website.

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Employee Retention Credit Eligibility, Requirements, and Deadline

To help small businesses weather the financial assault of the pandemic, Congress established the Employee Retention Tax Credit (ERTC) in March 2020. It has been increased twice since then to help more struggling enterprises benefit from the ERTC and reduce their federal tax liability.

By completing Form 941-X for each quarter they paid taxable wages, eligible employers can retroactively claim the ERTC. The deadline for submitting claims for the 2020 ERTC is April 15, 2024, and the 2021 ERTC is April 15, 2025. Learn more about the ERTC and how to make the most of it below.


  • All full-time workers at organizations with 100 or fewer employees count toward qualification, regardless of whether or not they are doing eligible services throughout the eligibility period. Only full-time workers receiving pay but not delivering service owing to shutdowns and decreased gross receipts are considered in the calculation for companies with over 100 employees.


To receive the ERTC, businesses must itemize their quarterly tax returns (Form 941 for most companies) and provide information about their eligible earnings and health insurance expenditures. This credit can offset the employer's portion of Social Security taxes.

  • The company must have been operational within the applicable time frame.
  • To qualify for the ERTC for salaries paid with PPP funding, the employer cannot have received a PPP loan forgiveness after December 31, 2020.
  • The company must have kept the same number of workers on staff or rehired those temporarily laid off or furloughed.


  • The ERTC application deadline has been extended to December 31, 2021, for earnings paid between March 13, 2020, and December 31, 2020. The deadline for claiming the credit for wages earned between January 1, 2021, and December 31, 2021, is the employer's tax filing deadline for the year, including extensions.
  • It's also possible that the EITC's eligibility conditions and the deadline had changed since September 2021, when I last checked.
  • Leave Act (FMLA), as the same wages cannot be claimed for both credits.

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ERTC Rules

A maximum tax credit known as the Employee Retention Tax Credit (ERTC) is offered to businesses due to the COVID-19 pandemic. Some ERTC ground rules are as follows:

  • Employers may qualify for the credit if they either entirely or partially shut down due to a government order concerning COVID-19 or saw a significant drop in gross receipts.
  • Employee Risk and Compensation Credit (ERTC) Credit Amount The ERC tax credits are a refundable tax credit equivalent to a percentage of qualified salary and health plan expenses given to employees, up to a set dollar amount per employee per calendar same quarter.
  • The refundable credit is only available for a percentage of qualified wages, and that percentage varies based on the employer's size. Qualified wages are restricted to non-service-related compensation for companies with more than 500 full-time employees. Wages paid to all employees are considered eligible wages for businesses with 500 or fewer full-time workers.
  • Qualified health insurance costs are another expense eligible recovery startup businesses can include in the credit computation.

However, wages received with PPP loan monies are not eligible for the ERTC, and other restrictions may apply according to the relevant legislation and IRS guidelines.

Employers must report the ERTC on their federal employment tax deposits form, and the credit must be factored into the quarterly anticipated tax payments made by the business.

What are the Deadlines for Employee Retention Tax Credit 2020,2021 & 2023

Since its inception in 2020, the ERC deadline has been nebulous. Businesses hoping to take advantage of the credit needed clarification because it had been relocated many times due to IRS guidance and the passing of new legislation. Recent misleading marketing by questionable ERC companies has created a false feeling of urgency about the ERC application process.

Let's dispel some of the myths surrounding the ERC's submission deadline.

Businesses that kept paying their employees despite being shut down in response to COVID-19-related government directives or significant drops in gross receipts in 2020 and 2021 are eligible for the Employee Retention Credit (ERC), a quarterly payroll tax return.

Before the fourth year has passed, after the original filing date for a qualifying quarter, a qualifying employer must file an amended payroll tax return to claim the ERC. However, there is a discrepancy between the date a return is filed and the date it is considered filed for payroll taxes.

To qualify for the ERC for any 2020 calendar quarter, an adjusted payroll tax return must be submitted by April 15, 2024. The modification must be submitted by April 15, 2025, for the 2021 calendar quarter.

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  • For Q1-4 2020, ERC claims must be filed by April 15, 2024
  • For Q1-4 2021, ERC claims must be filed by April 15, 2025

The statute of limitations for IRS assessment applies to claims made within three years of the deemed filing date. As a result, audits of ERC claims for the entire 2020 calendar year will be possible until April 15, 2024. Audits of 2021 first- and second-quarter ERC claims will be accepted until April 15, 2025.

The IRS, however, granted a two-year extension for the final two calendar quarters of 2021. Audits of ERC claims for the third and fourth quarters of 2021 will now be possible until April 15, 2027.


  • For Q1-4 2020, the three-year statute ends on April 15, 2024
  • For Q1-2 2021, the three-year statute ends on April 15, 2025
  • For Q3-4 2021, the five-year rule ends on April 15, 2027


Some commonly asked questions about the Employee Retention Tax Credit (ERTC) are addressed below.

1. Who can apply for the ERTC?

To qualify, an employer must have experienced a considerable drop in quarterly gross receipts from the previous year's corresponding quarter or a whole or partial shutdown of activities owing to a government order linked to COVID-19.

2. What is the value of the credit, please?

A financing offer of up to 70% is possible of the first $10,000 quarterly compensation for each qualifying employee. In 2021, each worker can receive up to a $28,000 credit.

3. To join the ERTC, how do I go about it?

The ERTC can be claimed by filing IRS Form 941 with your quarterly payroll costs payment. The credit can be claimed by following the steps outlined in the instructions for Form 941.

4. What kind of documentation I need to submit to get the rebate?

To ensure you qualify for the recognition and file your claim correctly, you should talk to a payroll tax credit expert or read the IRS's official instructions.

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5. When must the credit be requested by?

There are time limits on filing for the rebate. Earnings paid in the first two quarters of 2021 can be claimed for the credit until September 30, 2021; payments paid in the third and fourth quarters of 2021 can be claimed until December 31, 2022. The 2020 rebate application deadline has passed.

6. If I have already gotten aid for COVID-19, may I still apply for the ERTC?

You can apply for the ERTC in addition to the Paycheck Protection Program (PPP) and other COVID-19-related aid programs, but you can't utilize the same earnings for both.

Final Thought - How to Apply for Employee Retention Tax Credit

The article updates the qualifying criteria, conditions, and deadlines for the Employee Retention Tax Credit (ERTC) as of September 2021. The government has established the Economic Recovery Tax Credit (ERTC). The article covers eligibility requirements, credit calculations, form completion, form submission, record keeping, and other aspects of applying for the ERTC. A tax professional or the IRS website should be consulted for the most up-to-date information and suggestions about the ERTC.