This FAQ is not included in the Internal Revenue Bulletin, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case.
1. What is the Employee Retention Credit?
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. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.
2. Who is an Eligible Employer?
Eligible Employers for the purposes of the Employee Retention Credit are employers that carry on a trade or business during calendar year 2020, including tax-exempt organizations, that either:
Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
Experience a significant decline in gross receipts during the calendar quarter.
Note: Governmental employers are not Eligible Employers for purposes of the Employee Retention Credit. However, tribes or tribal entities may be Eligible Employers if they operate a trade or business. See If a tribe or tribal entity operates a trade or business, is the tribe or tribal entity eligible for the Employee Retention Credit? Also, self-employed individuals are not eligible for this credit for their own self-employment earnings, though they may be able to claim the credit for wages paid to their employees.
For more information, see Determining Which Employers are Eligible to Claim the Employee Retention Credit.