COVID-19 CARES Act Employee Retention Tax Credits

Last Updated on April 2, 2020 by G. T. HR

Employee Retention Tax Credits for Businesses Impacted by Coronavirus

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) creates an employee retention tax credit, which is designed to encourage eligible employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19.

The employee retention credit is a fully refundable tax credit equal to 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. This tax credit applies to qualified wages paid after March 12, 2020, and before Jan. 1, 2021. The maximum credit for qualified wages paid to any employee is $5,000.

Eligible employers are those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, and that either:

  • Fully or partially suspend operation during any calendar quarter in 2020 due to orders from a governmental authority limiting commerce, travel or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
  • Experience a significant decline in gross receipts during the calendar quarter.

This Compliance Bulletin contains the IRS’ new release regarding the employer retention tax credit.

Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit.

Are you Eligible?

Employers that experience an economic hardship due to the COVID-19 pandemic should determine whether they are eligible for this new tax credit. Employers may also be eligible for a tax credit for paying sick or family leave wages to employees who are unable to work or telework due to certain circumstances related to COVID-19. The same wages cannot be counted for both tax credits.

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