On March 31, 2020, the Treasury Department and the IRS launched the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50 percent of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
To qualify for the tax credit, small business owners need to satisfy one of the following conditions:
(1) Your business is fully or partially suspended by government order due to COVID-19 during the calendar quarter; OR
(2) Your gross receipts are below 50 percent of the comparable quarter in 2019. Once the employer’s gross receipts go above 80 percent of a comparable quarter in 2019 they no longer qualify after the end of that quarter.
Wages paid after March 12, 2020, and before January 1, 2021 qualify for the tax credit. A portion of the cost of health care paid also qualifies. The Treasury Department and IRS will be issuing more guidance on this matter and we will send out updates and more information as it becomes available. For now, check out the Treasury Department’s press release or the IRS’s news release for more details and instructions.
You can also apply for advance payment of tax credits by submitting Form 7200 available through the IRS website.
If available to your business, please take advantage of this immediately.
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