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CARES Act - Employee Retention Credit

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Employee Retention Credit

  1. Is for eligible employers
    1. Whose operations were fully or partially suspended during a quarter due to Government Authority
    2. Whose revenue in 2020 is less than 50% of the revenue from the same quarter in 2019.
    3. The employer will continue to be eligible for the credit until
      1. The end of 2020
      2. Depending upon the method of qualification (Note: These requirements will be recalculated each quarter.)
        1. There is a quarter where there is no government suspension for the business
        2. Gross revenue for the quarter exceeds 80% of the gross revenue from the same calendar quarter in 2019. Once you reach this threshold in a quarter, you will not qualify in the subsequent quarter.
      3. The credit is available for wages paid after March 12, 2020 and before January 1, 2021.
      4. The credit is a refundable credit.
    4. Calculating the Credit
      1. Businesses with 100 employees or less are allowed to calculate the credit using the applicable wages for all employees.
      2. Businesses with more than 100 employees are allowed to calculate the credit using only the applicable wages paid to individuals who are not working either due to:
        1. the government shutdown, or
        2. because business revenues have declined as outlined above.
      3. The amount of the credit is equal to
        1. 50% of all eligible wages paid during the periods outlined above.
        2. Eligible wages for any single employee are capped at $10,000 for the year.
        3. Eligible wages include amounts paid for healthcare costs under a qualified plan.
        4. Eligible wages are limited to those wages an employee would have normally worked and earned during the time period.
    5. Ineligible Wages include wages taken into account for the Paid Sick Leave and Family Leave Credits under the Families First Coronavirus Response Act (H.R. 6201)
    6. Employers eligible for this credit, are able to reduce their 941 federal tax deposits, including employee withholdings, for eligible credit amounts.
    7. Employers who are eligible for credits can fund future payments of qualified wages by reducing payroll tax deposits in advance of the payroll. Previously withheld payroll taxes not yet remitted, even if resulting from payrolls prior to this legislation being enacted, are eligible for credit offsets.
    8. Employers who fund qualified wages with eligible credits by reducing payroll tax deposits will not be subject to penalties and interest for underpayment as long as, the employer did not seek an advance payment of the payroll taxes.
    9. An employer can get an “Advanced Payment of Employer Credits Due to COVID-19” to fund qualified payroll wages, where the payroll tax offsets will not be sufficient to cover the wages paid.
      1. The employer will file form 7200 to request a refund for the full amount of the credit needed to cover the shortfall.
      2. The amount received will be reconciled on the Quarterly 941 return along with credit offsets used during the quarter in lieu of depositing payroll taxes.
    10. Employers are not prevented from receiving the available credits under the Families First Coronavirus Response Act for Paid Sick Leave and Family Leave and also receiving the Employee Retention Credits under the CARES Act. However, the same wages are not eligible for calculating both credits.
  2. Employers who receive an SBA loan under the Paycheck Protection Program authorized under the CARES Act are not eligible for the Employee Retention Credit.

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