On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act contains several new entitlements which have garnered a lot of attention, including the $600.00 in additional unemployment compensation paid for by the federal government. A lessor known provision, called the Employee Retention Credit, provides eligible employers with an incentive to businesses to keep employees on their payroll. The tax credit is available to all private employers who did not receive a Small Business Interruption Loan under the Paycheck Protection Program (PPP).

Eligible employers include those who: (1) experienced the full or partial suspension of the operation of their trade or business during any calendar quarter due to a COVID-19 related government order; or (2) experienced a significant decline in gross receipts. The program provides a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages (including certain health plan expenses), paid after March 12, 2020 and before January 1, 2021.

Employers may claim the credit beginning with the second calendar quarter of 2020. To claim the credit, employers should report their total qualified wages and the related health plan costs for each quarter on their quarterly employment tax returns, usually Form 941. The credit is taken against the employer’s share of social security tax, but the excess is refundable under normal procedures. Employers can benefit from the credit prior to filing by reducing their federal employment tax deposits by the amount of the credit. Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

The attorneys at Fishel Downey Albrecht & Riepenhoff, LLP routinely advise public and private employers on compliance with state and federal employment regulations. If you have any questions about this or any other matter, please contact us at info@fisheldowney.com or call 614-221-1216.