Tax Credit Available to Businesses Affected by COVID-19

Eligible employers whose businesses have been impacted by COVID-19 have access to a tax credit through the CARES Act. The Employee Retention Credit — also called the ERC — is a refundable credit designed to help employers to keep employees on their payroll.

The ERC provides businesses with a tax credit for as much as $5,000 per full-time employee. And it’s available to all employers regardless of size — including tax-exempt organizations. Businesses and organizations qualify if they’re fully or partially shut down because of COVID-19 or experience a significant decline in gross receipts.

The ERC is different from the Employer Payroll Tax Deferral. With the deferral, your business can postpone paying some payroll taxes due in 2020 by paying half of those taxes at the end of 2021 and the other half at the end of 2022.

The ERC is not available to:

1. State and local governments, including government agencies and corporations
2. Self-employed individuals
3. Small businesses that take out a small business loan under the Paycheck Protection Program

If an employer doesn’t qualify for the credit because of a full or partial shutdown, an eligible employer may still qualify if they experience a significant decline in gross receipts. Their gross receipts must be below 50% of the comparable quarter in 2019 to qualify. As soon as the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

For more information about various COVD-19 relief options for businesses, see our employee guide. If you have any questions about ERC or other issues affecting your organization, let us know.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.