ERTC for 2020 vs. 2021: What Changed and Why It Matters

The Employee Retention Tax Credit (ERTC) was introduced to help businesses retain employees and recover from the economic impact of the COVID-19 pandemic. However, not all ERTC rules remained the same between 2020 and 2021.

Significant changes were made to eligibility, credit amounts, and qualification criteria, making 2021 far more beneficial for businesses than the 2020 version. Many businesses that initially assumed they didn’t qualify are now discovering they can claim substantial tax refunds—even if they previously received Paycheck Protection Program (PPP) loans.

In this guide, we’ll break down:
✔ How ERTC changed from 2020 to 2021
✔ Eligibility differences for each year
✔ How much businesses can claim per employee
✔ Steps to file for retroactive ERTC refunds

If your business hasn’t claimed both 2020 and 2021 ERTC refunds, you may be leaving money on the table.

1. Understanding the ERTC Program

The ERTC is a refundable payroll tax credit that businesses can claim for keeping employees on payroll during periods of financial hardship.

📌 How ERTC Works:
✔ Employers receive a credit against payroll taxes for wages paid to eligible employees.
✔ The credit can be refunded, meaning businesses get cash back from the IRS.
✔ The program originally covered wages paid in 2020 and 2021, but claims can still be filed retroactively.

💡 Even if your business didn’t originally claim ERTC, you can still apply for refunds until April 2025!

2. ERTC 2020 vs. 2021: Key Differences

Although the ERTC remained the same conceptually, several major improvements in 2021 made the tax credit more accessible and valuable for businesses.

Category2020 ERTC2021 ERTCRevenue Decline Requirement50% decline in any quarter vs. 201920% decline in any quarter vs. 2019Credit Amount50% of wages (up to $5,000 per employee total)70% of wages (up to $7,000 per employee per quarter)Maximum Refund per EmployeeUp to $5,000 for the entire yearUp to $21,000 for the yearEligibility for PPP RecipientsNot originally allowed, later changedFully allowed—PPP & ERTC can be claimed togetherBusiness Size Limit (for full-time wages to qualify)Employers with 100 or fewer full-time employeesEmployers with 500 or fewer full-time employeesCoverage PeriodMarch 13 - Dec 31, 2020Jan 1 - Sept 30, 2021 (Dec 31, 2021 for Recovery Startup Businesses)

💡 Why This Matters:

• 2021 was more generous than 2020—higher credit amounts and easier qualification.

• The revenue decline requirement was lowered from 50% to 20%, making it easier for businesses to qualify.

• The employee threshold expanded from 100 to 500 employees, benefiting mid-sized businesses.

3. How Much Can Businesses Claim for ERTC in 2020 vs. 2021?

Many businesses don’t realize just how much money they can still claim through ERTC.

🚀 Maximum ERTC Refunds by Year:

📌 2020

✔ 50% of wages paid per employee per quarter.
✔ Capped at $5,000 per employee for the entire year.

📌 Example:

• If an employee was paid $20,000 in qualified wages in 2020,

• The employer would receive 50% of $10,000 = $5,000 in tax credits.

💡 Max Refund for 10 Employees in 2020: $50,000

📌 2021

✔ 70% of wages paid per employee per quarter.
✔ Capped at $7,000 per quarter (up to $21,000 per employee for the year).

📌 Example:

• If an employee was paid $10,000 per quarter in 2021,

• The employer would receive 70% of $10,000 = $7,000 per quarter

• Across 3 eligible quarters, that’s $21,000 per employee!

💡 Max Refund for 10 Employees in 2021: $210,000

🚀 Total Possible ERTC Refund (2020 + 2021) for 10 Employees: $260,000

4. Who Qualifies for ERTC in 2020 and 2021?

Your business may be eligible for ERTC under one of two conditions:

✅ Option 1: Significant Revenue Decline

A business qualifies if it experienced a decline in gross receipts compared to 2019:

• 2020: 50% revenue drop in any quarter

• 2021: 20% revenue drop in any quarter

🚀 New Rule for 2021:
✔ If a business did not meet the 20% revenue decline in a quarter, it can use the previous quarter’s decline instead.

✅ Option 2: Full or Partial Suspension of Business Operations

Even if revenue didn’t drop enough, a business may still qualify if it faced government-mandated restrictions.

📌 Examples of Qualifying Business Disruptions:
✔ Forced to reduce capacity (restaurants, retail stores)
✔ Supply chain delays that disrupted normal operations
✔ Restricted customer access due to local mandates
✔ Reduced operating hours due to curfews

💡 Even if a business remained open, restrictions affecting at least 10% of operations could qualify it for ERTC.

5. How to Claim Your ERTC Refund Before the Deadline

Many businesses haven’t applied for ERTC yet or wrongly assumed they didn’t qualify. The IRS allows retroactive claims—but deadlines are fast approaching!

📅 ERTC Filing Deadlines:
✔ April 15, 2024 – Last day to claim 2020 ERTC refunds.
✔ April 15, 2025 – Last day to claim 2021 ERTC refunds.

🚀 Steps to File for ERTC Retroactively:
1️⃣ Gather payroll records and tax filings for 2020 & 2021.
2️⃣ Determine which quarters qualify based on revenue decline or government restrictions.
3️⃣ File an amended payroll tax return (Form 941-X) for each eligible quarter.
4️⃣ Wait for the IRS to process the claim (refunds take 6-12 months due to backlogs).

💡 The sooner you file, the faster you receive your refund!

Don’t Miss Your ERTC Refund Opportunity

The ERTC program changed significantly from 2020 to 2021, making more businesses eligible and increasing the maximum refund per employee.

💡 Key Takeaways:
✔ 2021 ERTC was more generous—higher credit amounts, easier qualification.
✔ Businesses can still claim refunds retroactively by filing Form 941-X.
✔ The deadline to claim 2020 ERTC is April 15, 2024, and for 2021, it’s April 15, 2025.
✔ If you haven’t applied yet, you could be missing out on thousands (or even millions) in tax credits.

How Business Networks Can Aid in Recovery:

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