The IRS has revised the FAQ related to the Employee Retention Credit under the CARES Act,[1] adding information on when employers qualify for the credit among other items. The Employee Retention Credit (ERC) is a refundable credit employers claim against payroll taxes due on Form 941, equal to ½ of eligible wages paid during specified periods.

Employers need to meet one of two tests to be eligible for the credit for certain wages paid after March 12, 2020 and before January 1, 2021:

• Fully or partially suspend operation during 2020 due to government orders limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or

• Experience a significant decline in revenues (revenues for a quarter in 2020 less than 50% of the same quarter in 2019).

The CARES Act limited qualification for the credit to employers that did not receive a PPP loan. Later SBA and IRS guidance clarified that those entities that returned the funds received in their entirety to the lender by May 18, 2020 will not be barred from claiming the ERC