As part of the CARES (Coronavirus Aid, Relief, and Economic Security) Act, your company may be eligible for the employee retention tax credit. This is for private employers, including non-profits, who are closed, partially closed, or experiencing significant revenue losses as a result of COVID-19.
The new employee retention tax credit is a 50% tax credit for the first $10,000 of compensation, including the employer portion of health benefits, for each eligible employee. The credit applies to wages paid after March 12, 2020 and before January 1, 2021.
For employers with more than 100 employees, full time employees who are being paid but not providing service due to a shutdown or reduction in gross receipts count toward eligibility. However, for employers with less than 100 employees, all employees are eligible regardless if they are providing service.
Eligibility for the tax credit may not be available or may be reduced for the following reasons:
- If you received a Paycheck Protection Program (PPP) loan
- You may not claim the same employee for this retention credit and the Work Opportunity Tax Credit for the same period of time.
- You may not claim the same wages for an employee under this retention credit and also under the employer credit in section 45S for FMLA
The refundable tax credit is applied against the employer portion of payroll taxes and is reported on the quarterly Form 941. Form 7200 may be filed with the IRS for employers to receive and advance payment of the tax credit.
Contact us with any questions regarding your company’s eligibility or tracking of the employee retention tax credit.