Coronavirus Relief Credits

2020 and 2021 Coronavirus (COVID-19) Economic Relief Legislation

98% of Small Businesses will qualify for this benefit. This is a 100% reduction in your payroll tax liability along with a potential immediate cash infusion into your company. (Think Paycheck Protection Program (PPP) loan that you will never have to payback.) You have a limited time to claim these credits so time is of the essence. Highlights of the bill are below.

Highlights of Employee Retention Tax Credit Modifications
The provision extends and expands the CARES Act employee retention tax credit (ERTC). It also contains technical corrections to the CARES Act.

If you retained employees from March 2020 through December 31 2021 you may qualify for these payroll tax credits.
- Up to $5,000 per employee per year in 2020 (50% of wages up to $10,000)
- Up to $7,000 per employee per quarter in 2021 (70% of wages up to $10,000)
In addition, the American Rescue Plan Act of 2021 includes two new categories and incentives for the third and fourth quarters of 2021:
- Recovery Startup Business – Employers that began their business after February 15, 2020 and have annual gross receipts not exceeding $1 million. The credit for these employers is capped at $50,000 per quarter. Recovery startup businesses do not need to meet the government orders or gross receipts test to qualify.
- Severely Financially Distressed Employers – Employers whose gross receipts for the quarter are less than 10 percent of their gross receipts for the equivalent quarter in 2019. An employer in this category with more than 500 employees can credit all wages paid and does not need to meet the “not providing services” requirement.
Contact us for more information and to see if you qualify.
5 Year Extension of Empowerment Zones (Fed EZ) & Work Opportunity Tax Credit (WOTC)
- 2 Year Extension of Indian Employment Credit (IEC)
- 1 Year (Plus 60 Days) Extension & expansion of Disaster Relief (Covers CA Wildfires, Hurricanes Zones on the COast and WInds in the Mid West.
- 6 Month Extension & Expansion of the Employment Retention Tax Credit ( Covid Credit)
Retroactive to the effective date included in section 2301 of the CARES Act, the provision:
- Provides that employers who receive Paycheck Protection Program (PPP) loans may stil qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.
- Clarifies the determination of growss receipts for certain tax-exempt organizations
- Clarifies that group health plan expenses can be considered qualified wagges even when no other wages are paid to the employee, consistent with IRS guidance.

Contact Us for Information

About the COVID-19 Employee Retention Credit (ERC)

New to the final version of the CARES Act is a one-year only credit against the employer’s 6.2% share of Social Security payroll taxes for any business that is forced to suspend or close its operations due to COVID-19, but that continues to pay its employees during the shut-down. Here is how it works...

A business is eligible for the credit in one of two ways:

The operation of the business was fully or partially suspended during any calendar quarter during 2020 due to orders from an appropriate government authority resulting from COVID-19, or
The business remained open, but during any quarter in 2020, gross receipts for that quarter were less than 50% of what they were for the same quarter in 2019. The business will then be entitled to a credit for each quarter, until the business has a quarter where it’s recovered sufficiently that its receipts exceed 80% of what they were for the same quarter in the previous year.

For each eligible quarter, the business will receive a credit against its 6.2% share of Social Security payroll taxes equal to 50% of the “qualified wages” paid to EACH employee for that quarter, ending on December 31, 2020.

The business’s qualified wages depend on its size; if there were more than 100 employees during 2019, the qualified wages are limited ONLY to those wages that were paid by the employer during the quarter for the period of time the business was shut down.

If there were less than 100 employees for 2019, however, qualified wages include not only those paid to employees during a shut-down, but also wages paid for each quarter that the business has suffered a sharp decline in year-over-year receipts, as described in #2 above.

In both cases, qualified wages include any “qualified health plan expenses” allocable to the wages, such as amounts paid to maintain a group health plan. In either case, however, the amount of qualified wages for EACH employee for ALL quarters may not exceed $10,000.

As you might expect, any wages taken into account in determining the new payroll tax credit for family medical leave or sick leave as part of the Coronavirus Relief Act may not be taken into account in determining qualified wages for the employee retention credit.

The credit is refundable if it exceeds the business’s liability for payroll taxes, a likely outcome given the two new payroll tax credits mentioned immediately above that were created as part of the Coronavirus Relief Act late last week.

Finally, if an employer takes out a payroll protection loan under Section 7(a) of the Small Business Act as detailed above in this article, no employee retention credit will be available.