Is The Employee Retention Credit (ERC) Available In 2022?

No, the employee retention tax credit (ERC) is not available for employers to claim for work performed in 2022. The ERC program expired completely on January 1, 2022, after being extended several times. However, you can still claim it for 2020 and 2021.

Originally enacted in March 2020 under the CARES Act, the ERC provided eligible employers with a refundable tax credit for retaining employees during COVID-19 impacts and economic disruptions. It was extended through December 31, 2021.

But without another extension by Congress, employers cannot claim ERC for qualified wages paid in 2022. The credit cannot be claimed retroactively for Q1, Q2, Q3, or Q4 in 2022.

While disappointing for struggling businesses, the expiration was known in advance, allowing companies to maximize benefits through 2021. Employers should consult tax experts to ensure no ERC amounts were missed prior to the 2022 expiration date.

But for now, no employers qualify for the ERC in 2022. Planning for this expiration was essential to take full advantage of the substantial credit while available.

What Are The Eligibility Requirements To Claim The ERC In 2021?

For the tax year 2021, employers qualified for the now-expired employee retention tax credit (ERC) if they met either of these COVID-19 impact eligibility criteria:

  • Experienced a full or partial suspension of operations during any 2021 calendar quarter due to government orders limiting commerce, travel, or group meetings.
  • Experienced a decline in gross receipts where gross receipts for a quarter were less than 80% of gross receipts for the same quarter in 2019. Declines during the 2020 quarters could also be used.

In addition, to claim the credit for paying qualified wages to an employee, that employee had to be employed for some period within the 2021 calendar year quarter that the ERC was being claimed for.

Qualified wages depended on the company’s average number of employees during 2019 and limitations applied for small employers under 100 employees versus large employers.

Certain aggregation rules determined eligibility for companies that were part of controlled groups or affiliated service groups under the same umbrella.

Meeting either the government-ordered shutdowns or the gross receipts decline thresholds qualified employers to claim ERC in 2021.

How Is ERC Eligibility Different In 2022 Compared To 2021?

The eligibility requirements to qualify for the employee retention tax credit (ERC) in 2022 are different compared to 2021 because the ERC program expired completely as of January 1, 2022.

In 2021, employers could claim the ERC based on:

  • Full or partial COVID-19-related shutdowns of business operations.
  • Experiencing a 20% or greater decline in gross receipts for a quarter compared to the same quarter in 2019.

However, for 2022, there are no eligibility criteria to qualify because no employer can claim the ERC this year. The credit expired on December 31, 2021, and is no longer available.

While 2021 rules provided two potential pathways to eligibility based on pandemic impacts, the absence of the program in 2022 means no employers qualify this year regardless of COVID-19 disruptions, shutdowns, or revenue declines companies may be experiencing.

Some efforts are underway advocating for a reinstatement of the credit in 2023. But for now, the difference is that eligibility ended across the board when the program expired in 2022. Companies can no longer qualify with no active ERC this year.

Can Companies That claimed The ERC In 2021 Also Qualify In 2022?

Yes, it was possible for companies that qualified for and claimed the employee retention tax credit (ERC) in 2021 to continue meeting eligibility requirements and also claim ERC in early 2022 before the program expired completely.

ERC eligibility in 2021 and 2022 was based on COVID-19 impacts including:

  • Government-ordered full or partial shutdowns of business operations.
  • Experiencing gross receipt declines of 20% or more compared to the same quarter in 2019.

Some employers that had those types of continued disruptions in Q4 2021 and Q1 2022 could qualify for ERC in both periods assuming all other program requirements were met.

However, ERC eligibility ended completely on January 1, 2022, when the program expired. So no employers can claim ERC for any period in 2022 beyond Q1. Some employers likely qualified in both 2021 and very early 2022 if they had COVID-19 impacts exceeding gross receipts decline thresholds consistently across quarters. Proper planning around the expiration was essential to maximize ERC through the end of eligibility.

What Types Of Employers Qualify For The ERC In 2021 But Not In 2022?

The employee retention tax credit (ERC) program expired completely as of January 1, 2022. As a result, no employers qualify for the ERC in 2022, unlike 2021 when eligibility was based on certain COVID-19 impacts.

In 2021, the following types of employers did qualify for ERC but lost eligibility in 2022 after program expiration:

  • Employers were forced to fully or partially suspend operations in 2021 due to government orders limiting commerce, travel, or group meetings.
  • Employers experienced a 20% or greater decline in gross receipts for the 2021 quarter compared to the same quarter in 2019.
  • Small employers with 100 or fewer employees who paid qualified wages in 2021 quarters impacted by COVID-19.
  • Large employers who paid qualified wages in 2021 to employees not providing services.
  • Tax-exempt organizations that met 2021 eligibility criteria.

While these employers qualified for ERC in 2021, eligibility ended completely on January 1, 2022, for all organizations regardless of COVID-19 impacts, shutdowns, or revenue declines in 2022. Planning for expiration was essential to maximize ERC through the end of 2021.

What Are The Gross Receipts Decline Thresholds To Qualify For The ERC in 2022?

Since the employee retention tax credit (ERC) program expired completely on January 1, 2022, there are no gross receipts decline thresholds that employers can meet to qualify for ERC in 2022.

In 2021, the gross receipts decline eligibility thresholds were:

  • A 20% or greater decline in gross receipts for the 2021 quarter compared to the same quarter in 2019.
  • This meant 2021 gross receipts for a quarter had to be less than 80% of 2019 gross receipts for that same quarter to meet the decline threshold.

However, with the expiration of ERC, these prior gross receipts decline thresholds no longer apply in 2022 and no employers qualify this year regardless of gross receipts changes.

Even if companies could demonstrate a 20%, 30%, 50%, or greater decline when comparing their 2022 quarterly gross receipts to 2019 gross receipts for the same quarters, it would not make them eligible for ERC in 2022.

While these decline percentages did allow employers to qualify in 2021, the absence of the ERC program altogether in 2022 means gross receipts decline no longer factor into eligibility starting January 1, 2022. Proper planning for this expiration was essential for companies to maximize ERC through the end of 2021.

Do Tax-Exempt Organizations Qualify For The ERC in 2022?

No, tax-exempt organizations do not qualify for the employee retention tax credit in 2022 because the program expired completely as of January 1, 2022.

In 2021, tax-exempt employers could potentially qualify for ERC if they met eligibility criteria related to COVID-19 impacts including:

  • Experiencing a full or partial suspension of operations due to a government shutdown order.
  • Facing a 20% or greater decline in gross receipts for a quarter in 2021 compared to the same quarter in 2019.

But with the expiration of the ERC program at the end of 2021, no tax-exempt employers can claim ERC in 2022 even if they have COVID-19-related business disruptions.

While tax-exempt organizations like non-profits and churches did qualify in 2021 assuming eligibility criteria were met, the lack of an active ERC program in 2022 disqualifies all employers, including tax-exempt entities.

These organizations needed to properly claim and maximize 2021 ERC prior to 2022 expiration if they qualified based on required COVID-19 impacts and paid qualified wages to employees.

Can Employers Claim Both The ERC And Other COVID-19 Tax Credits In 2022?

No, employers cannot claim both the employee retention tax credit (ERC) and other COVID-19 payroll tax credits like the paid sick and family leave credit in 2022. This is because the ERC program expired completely as of January 1, 2022.

In 2021, it was possible for eligible employers to claim both ERC and tax credits under the Families First Coronavirus Response Act for paid leave wages if certain conditions were met.

But now that ERC has expired and is no longer an active program in 2022, employers cannot claim ERC at all this year. And no dual benefit opportunity exists to claim both ERC and FFCRA paid leave credits in 2022.

While the paid sick and family leave credits have been extended through September 30, 2022, ERC has lapsed and cannot be stacked on top of other COVID-19 tax relief programs this year.

The key difference in 2022 is the unavailability of ERC altogether now. Employers should consult tax advisors on what COVID-19 credits they may still qualify for in 2022 amid this changed landscape.

Do Small Businesses Have Different ERC Eligibility Rules in 2022?

There are no special employee retention tax credit (ERC) eligibility rules in 2022 for small businesses or any employers. This is because the ERC program expired completely as of January 1, 2022.

In 2021, there were some different ERC eligibility rules and limitations for:

  • Small employers with 100 or fewer full-time employees on average in 2019.
  • Large employers with over 100 employees.

Smaller employers could claim ERC in 2021 based on all W-2 wages paid to employees for quarters impacted by a government COVID-19 shutdown or gross receipts decline.

But now that ERC has expired and is no longer available, no employer qualifies for it in 2022 regardless of size. The absence of the program means the prior small business eligibility rules no longer apply.

While beneficial in 2021, small businesses cannot utilize special ERC qualifications in 2022. Proper planning for the expiration was essential for small companies to maximize the credit through the end of 2021 based on those more flexible rules.

Here Are Two Additional Resources On Employee Retention Tax Credit Eligibility in 2022:

https://www.irs.gov/newsroom/faqs-on-the-expiration-of-the-employee-retention-credit-erc-program

An IRS page explaining the ERC program expiration and lack of employer eligibility in 2022.

https://www.journalofaccountancy.com/news/2022/feb/no-employee-retention-credit-in-2022-without-congressional-action

A journal article detailing the complete expiration of the ERC as of tax year 2022.

Step 12: Here are two additional resources on the employee retention tax credit eligibility in 2022:

https://www.irs.gov/newsroom/faqs-on-the-expiration-of-the-employee-retention-credit-erc-program

An IRS page explaining the ERC program expiration and lack of employer eligibility in 2022.

https://www.journalofaccountancy.com/news/2022/feb/no-employee-retention-credit-in-2022-without-congressional-action

A journal article detailing the complete expiration of the ERC as of tax year 2022.

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