Update (September 2026): The Employee Retention Credit is now closed to new claims. The last dates to file were 15 April 2024 for 2020 quarters and 15 April 2025 for 2021 quarters, and the One Big Beautiful Bill Act (July 2025) bars refunds on third- and fourth-quarter 2021 claims filed after 31 January 2024. The IRS continues to warn about promoters who say every business qualifies. If you claimed the credit and are unsure you were eligible, speak to a qualified tax professional. The article below explains how the credit worked. Sources: IRS, Employee Retention Credit guidance and FAQs on the One, Big, Beautiful Bill ERC provisions.
Tax credits and deductions are a great way for small businesses to save money that could be used towards growth or current business operations.
The Best Tax Credit for Small Businesses
If you are a small business strategizing how to save costs, tax credits can be a great financial strategy. Most small businesses apply for tax credits or tax deductions. The credit or deduction you qualify for may vary, as will the amount you receive.
For small businesses whose business operations were fully or partially suspended due to COVID-19 regulations in 2020 or 2021, you may qualify for the Employee Retention Tax Credit (ERTC). In addition, businesses that saw a decline in gross receipts over 50% may also qualify.
Industries Eligible for ERTC
Small businesses across all industries may be eligible for ERTC in the United States if they have under 100 employees for 2020 or under 500 employees for 2021. The ERTC was established under the CARES Act to incentivize businesses to keep employees on payroll during the COVID-19 pandemic. Industries qualifying for the ERTC include:
- Construction
- Food Service
- Hospitality
- Retail
- Tech
Some industries suffered financially more than others from the pandemic. For example, movie theaters were either unable to open or had limited capacity. Even restaurants had to minimize interactions, as some even had to offer takeout only instead of indoor dining. Restaurants that did open may have been required to add outdoor dining to their space, which created an additional unforeseen expense.
The ERTC helps businesses across industries recoup the financial loss they may have experienced while keeping employees on payroll during the pandemic. This refundable tax credit can help them afford business expenses and paying wages and benefits for employees.
How Much Can a Business Earn from This Tax Credit?
The amount you receive from the ERTC varies depending on how many employees you have that help you qualify. ERTC is calculated using qualified wages paid to employees during the 2020 or 2021 tax year.
Businesses can earn up to $21,000 per employee for the 2021 tax year. For 2020 the limit was lower: $5,000 per employee for the whole year. This is a significant amount for even small businesses with only a few qualifying employees.
If you are approved for more than you owed in taxes for the 2020 or 2021 tax year, you will receive a refundable amount for the excess you earned. ERC consultants were used by many businesses to apply for the Employee Retention Tax Credit. A reputable ERTC consulting firm will consist of certified tax accountants and tax attorneys experienced in navigating the IRS.
What If I Don’t Qualify?
If you do not qualify for the ERTC, the IRS could audit your application. You do not want to be in hot water with the IRS for trying to receive money that you do not qualify for. Avoid ERTC mills consisting of uncertified consultants trying to submit your application to the IRS despite not fully qualifying. It is best to calculate the amount you could receive and determine whether you are eligible based on IRS requirements.
