Employee Retention Credit Changes

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The refundable tax credit is 70% of up to $10,000 in qualified wages.

The new COVID-19 Relief has a major change that will impact and benefit many small businesses in our community.

Did you have gross receipts for the quarter less than 80% from the prior year? OR

Was your business subject to closure or partial closure due to COVID-19 governmental mandates?

You are now eligible for the EMPLOYEE RETENTION CREDIT even if you participated in the Payroll Protection Program!

You read that right. You can now double dip. The Employee Retention Credit was designed to encourage employers to keep employees on their payroll. The refundable tax credit is 70% of up to $10,000 in qualified wages paid to an employee by an eligible employer experiencing economic hardship related to COVID-19. This credit is for wages paid from 3/13/2020 through 12/31/2020. The credit is generally available to all employers regardless of size, including tax exempt organizations.

The eligible employer is allowed a credit, against the 6.2% Social Security payroll tax, an amount equal to 50% of qualified wages. Therefore, the applicable payroll taxes are reduced by any credits allowed for employing qualifying veterans, small business research, and the new credits provided for in the Families First Coronavirus Response Act. Also, the excess of the credit over the payroll taxes is refundable. The self-employed are not eligible for their own earnings.

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 80 percent of its gross receipts for the same calendar quarter in 2019. The significant decline in gross receipts ends with the first calendar quarter that follows the first calendar quarter for which the employer's 2020 gross receipts for the quarter are greater than 80 percent of its gross receipts for the same calendar quarter during 2019.

If the employer was subject to partial or full closure due to COVID-19 they also are eligible for the credit. Further, the number of employees does not matter but the self-employed are not eligible for their own earnings.

The credit equals 70 percent of the qualified wages (including qualified health plan expenses) that an Eligible Employer pays in a calendar quarter. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for qualified wages paid to any employee is $7,000.

The amount of qualified wages for which an Eligible Employer may claim the Employee Retention Credit does not include the amount of qualified sick and family leave wages for which the employer received tax credits under the FFCRA.

Although the legislation has not been signed, we want to keep the small business community aware of the expected law. Please call or email us for any questions. We are excited to help businesses navigate through to the other side of these challenging times.