Employee Retention Credit

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided $2 trillion dollars in relief to both individuals and organizations that are being financially impacted (who isn't, really??) by the COVID-19 pandemic. While it's important to state that the individual details of each program and the rules, amounts etc. seems to change every week, the basic framework remains the same.

Once such program contained with the CARES Act, is the Employee Retention Credit (ERC), which may provide significant tax relief for many small business across the country. The ERC is a fully refundable tax credit that is primarily designed to give incentive to eligible employers who manage to keep employees on the payroll for the remainder of this year.

What is an eligible employer?

The tax credit under the ERC is only available to employers that meet the following:

Must have been forced to partially suspend operations during any quarter in 2020 as a result of the coronavirus crisis

Must have experienced a decline in gross receipts during any quarter in 2020 that amounts to 50% or more less than a comparable quarter in 2019

How much ERC I claim for my small business?

The amount of the credit you can take is equal to 50% of qualified wages that employers paid to employee between March 13, 2020 until December 31, 2020. The maximum amount of qualified wages you can use is $10,000 per employee for all calendar quarters, which means your maximum allowable credit is $5,000 per full-time employee. This credit can be used against your Social Security tax liability and can be claimed in several ways. Al always, I recommend consulting with your tax professional (NEGLCO TAX SERVICES) to make ensure that your claim for the ERC is filed completely, and accurately.

Anything else I need to know as the small business owner?

There are a couple other factors to consider when deciding whether or not to take the ERC:

• Your business cannot clam both the ERC and a Payroll Protection Program loan

• However, if you repaid the loan before the safe harbor deadline (May 18), you will still be able to take the ERC.

• Employers are allowed to take the ERC and FFCRA paid leave credits, as long as it is on different wages

• The ERC is not mandatory, i.e. you can opt not to take it

As you can see from the above, the Employee Retention credit can provide tax relief to small businesses that qualify, or have not taken advantage of some of the other programs available under the CARES Act.

Neglco Tax Services has tax professionals that are hear to guide you through the programs available to provide assistance in helping you understand what aid is best for your business that offers the best options to reduce your tax liability and/or help manage cash flow during this crisis.

Click here to contact Neglco today and schedule a FREE consultation call to discuss any questions you may have.