June 25, 2020

Is My Business Eligible to Claim the Employee Retention Tax Credit?

Qualified businesses can now take advantage of the employee retention tax credit as a COVID-19 relief option. For business operations that have been impacted by the pandemic, or simply experienced a significant decline in gross receipts compared to prior year, this credit is a great option. Below is a summary of the legislation updated June 15th, 2020.

Employee Retention Tax Credit Benefits

Qualified employers are allowed a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee.

Eligible Employers

  • All employers are eligible for the employee retention credit, including tax-exempt organizations.  However, if an employer receives a Small Business Interruption Loan under the Paycheck Protection Program authorized under the CARES Act, then the employer is not eligible for the Employee Retention Credit.
  • To qualify for the tax credit, eligible employers must be either:
    • An employer whose business is fully or partially suspended by a government order related to COVID-19; or
    • An employer with gross receipts that are less than 50% for the same quarter in the prior year.

Qualifying Wages

  • Qualifying wages are based on the average number of employees in 2019.
    • All wages paid qualify for the credit for employers with 100 or fewer employees.
    • Restrictions apply for employers with more than 100 employees.

Limitations

  • Qualified wages, including health care costs, are capped at $10,000 per employee regardless of the number of employees.
  • Qualifying wages cannot include wages that the employer received a credit for paid sick leave or paid family leaver under the Families First Coronavirus Reponses Act (FFCRA).
  • An employer must repay its PPP loan by the safe harbor deadline to be eligible.

Effective Date

Qualified employers can claim this refundable payroll tax credit for qualified wages paid to employees after March 12, 2020, and before Jan. 1, 2021.

This is a brief summary of the employee retention credit. Contact an Anders advisor for more details on how to claim the credit.  Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential business impacts and benefits. Visit our COVID-19 Resource Center for more news, tools and insights you need to know in these uncertain times.

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