SS+D COVID-19 Response Team: Employee Retention Payroll Tax Credits Under the Cares Act March 30, 2020
March 31, 2020 | Sebaly Shillito + Dyer
The CARES Act provides a quarterly refundable payroll tax credit against their share of FICA taxes equal to 50% of up to $10,000 of “qualified wages” paid to employees during the COVID-19 pandemic (resulting in a maximum credit of $5,000 per employee). An employer is eligible where:
- the employer’s operations were fully or partially suspended during any quarter of 2020 due to orders from a governmental authority that limited commerce, travel, or group meetings in response to COVID-19; or
- the employer remained open but experienced a sharp decline in year-over-year receipts (a reduction in gross receipts of at least 50% compared to the same quarter in 2019). The employer is entitled to the credit for each quarter until gross receipts for a quarter exceed 80 percent of receipts from the same quarter in
“Qualified wages” are wages and other compensation paid from March 12, 2020, through December 31, 2020. The amount of “qualified wages” will depend on the business and its size:
- If the employer had more than 100 employees in 2019, the qualified wages for a given quarter are limited to only those wages paid during the quarter while the employer was shut down.
- If the employer had 100 or fewer employees in 2019, the qualified wages for a given quarter include wages paid during the quarter while the employer was shut down and wages paid during the quarter where there was a sharp decline in year-over-year receipts (defined above).
However, even if the employer satisfies all the necessary requirements, the CARES Act generally provides that an employer is not eligible to receive both the retention credits under the CARES Act (described above) and tax credits under FFCRA attributable to sick leave wages and expanded family and medical leave wages. Similarly, an employer receiving a small business interruption loan is not eligible for employee retention payroll tax credit.
ABOUT THE SS+D COVID-19 RESPONSE TEAM
The SS+D COVID-19 Response Team was formed to provide clients, colleagues, and friends of the Firm updates for the foreseeable future on COVID-19 issues facing businesses, executives, and employees. Please let us know if there are any items/issues you would like for us to track or summarize.