The Coronavirus Aid, Relief, and Economic Security (CARES) Act* includes several significant business tax and nontax provisions.
Notably, the employee retention credit (ERC) provides immediate cash-flow relief to eligible employers that have been impacted by the COVID-19 pandemic. Such cash-flow relief comes in the form of a refundable employment tax credit, up to $5,000 per impacted employee for 2020 and up to $21,000 per impacted employee through Q3 of 2021 (28,000 through Q4 per impacted employee of an eligible recovery startup business)**.
What does the ERC offer to eligible employers?
In order to be an eligible employer for the credit, the employer must:
Qualified wages are wages and compensation paid to certain employees from March 13, 2020 through September 30, 2021. Qualified wages include the eligible employer’s qualified health plan expenses.
If the eligible employer averaged more than 100 full-time employees in 2019 (for 2020 wages) or more than 500 full-time employees in 2019 (for 2021 wages), qualified wages are limited to the wages paid to the employee for the time that the employee is not providing services due to the circumstances causing the employer to be an eligible employer.
A significant decline in gross receipts begins with the first quarter in which an employer’s gross receipts for a calendar quarter in 2020 are less than 50 percent of its gross receipts for the same calendar quarter in 2019, or for 2021 that are less than 80 percent of gross receipts for the same calendar quarter in 2019. Alternative considerations may apply as well.
Public colleges and universities as well as governmental health care employers may now be eligible for the ERC for qualified wages paid during Q1-Q3 2021.
Small and start-up businesses accross all industries may have an opportunity to receive financial relief through payroll tax credits, which may result
Employers that received a Paycheck Protection Program (PPP) loan may now be eligible for the ERC for both 2020 and 2021.
Employee Retention Credit
Seeking Clarity Amid COVID-19 July 2020 | This issue of Chief Tax Officer Insights – Issues Spotlight examines questions tax leader must answer as they weight the benefits against the risks of claiming the Employee Retention Credit.
Guidance for employers regarding retroactive termination of employee retention credit for wages paid.
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