Employee Retention Credit for Partial Shutdowns of Businesses

If you have a partial shutdown of your business, you may be eligible for a special tax credit. This credit is available for businesses in various industries and is worth as much as 30% of the total shutdown costs. However, there are a few things you need to know.

Qualifying quarters

The Employee Retention Tax Credit (ERC) is a significant tax credit that is available to any business that wants to retain its employees. This credit is a percentage of the first $10,000 in wages paid to each employee. It is a 50 percent payroll tax credit.

In order to qualify for the the ERC because of a partial shutdown, the employer must also have fewer than 500 full-time equivalent employees. It is also important to keep the gross receipts of the company below the amount of the previous quarter. If the company’s gross receipts fall below $80,000 in the current quarter, they will be eligible to claim the credit.

For businesses with more than 100 employees, it is important to note that the Employee Retention Tax Credit does not include wages earned by owners, their families, or any employee performing services. Wages not paid during a shutdown or voluntary closure are not included in the calculation of qualified wages.

A business that is shut down due to a governmental mandate can still qualify for the ERC. An example of this is a city mayor ordering all non-essential businesses to close. However, if this happens, it may not be possible to return to “business as usual” until the shutdown is lifted.

One way to ensure that the company is eligible for the ERTC is by filing a form 941-X. Form 941-X is a modified employer’s quarterly federal tax return.

Possible eligibilities

The Employee Retention Credit (ERC) is a tax credit for businesses that are motivated to retain employees and keep their payrolls off the IRS books. The credit can be claimed against employee wages and can be used by employers of all sizes and shapes. However, only businesses that are operating during a partial shutdown qualify. In other words, you cannot claim a full credit for all of your employee’s salaries.

There are several reasons why an employer might want to claim the ERC. One is that the credit could be much larger than what the employees actually earn. Second, the CARES Act provides an easy way for small businesses to access stimulus funds to offset employee wages. If your company has a steady and reliable workforce, you may not be tempted to do so.

There is a governmental order in effect in State Y, where the business is located, that requires non-essential businesses to close. This is not the only case in which an employer with multiple locations might be required to reassess their ERC eligibility.

A governmental order might be the best way for an employer to claim the employee retention credit. But it also has a downside: it restricts an employer’s activities. For example, a business that has an online ordering system, such as a grocery store, might not be allowed to fulfill orders during the shutdown.


The IRS has posted a number of FAQs about employee retention credit for partial shutdowns of businesses. While these are not binding guidance, they reflect the current thinking of the agency.

One of the most common questions is whether a business can qualify for the ERC for a partial shutdown. The answer depends on the facts and circumstances of the employer. If the business is eligible, the employer can claim the tax credit.

There are a number of ways to calculate the credit. It depends on the number of full-time employees. Full-time employees are defined as those who work at least 30 hours per week. However, an essential business is not eligible for the credit. Essential businesses are those that cannot be interrupted without significant damage to the business.

If the government orders a partial shutdown of a business, the employer may qualify for the credit. However, the government order may limit the types of business activities that are allowed. For example, the city mayor could issue a shutdown order that requires businesses to shut down.

Other partial shutdowns include on-line sales and restaurants that close their dining rooms. In this case, the restaurant might be able to continue offering carry-out service.

Some authorities have also proposed plans to make it easier for businesses to remain open. They will likely lift the stay-at-home and partial shutdown orders in stages.