March 31, 2020

Employer Retention Tax Credit

The recently enacted Coronavirus Aid, Relief and Economic Security (CARES) Act, opens the door to tax saving, retirement plan, and business financing opportunities for Atlanta businesses. The comprehensive nature of the Act has made it difficult to understand the specific details surrounding each incentive and benefit program. This is especially true when perusing the COVID-19 tax opportunities available to both small businesses and not for profit organizations. Not only are there various criteria that must be satisfied to claim the benefit, but the actual amount can also vary by situation. To help clients, prospects, and others, Wilson Lewis has provided an in-depth review of the Employer Retention Tax Credit below.

What is the Employer Retention Tax Credit?

The tax credit was created to reward employers that retain employees during the COVID-19 emergency and throughout the year. The credit is taken against the employer’s portion of social security payroll tax and is equal to 50% of up to $10,000 in wages paid.  

Qualifying for the Credit

In order to qualify a business must have been partially or fully suspended by the government and prove that gross receipts have dropped below 50% in comparison to the same quarter in 2019. It’s important to note only qualifying wages paid between March 12, 2020, and January 1, 2021, are eligible for the credit.

Qualifying Wages

Qualifying wages are based on the average number of employees in 2019 and is determined based on business size.

• Less than 100 Employees – If the business had less than 100 employees during 2019, the credit is based on all wages paid to employees, regardless if they worked or not.
• More than 100 Employees – If the business had more than 100 employees during 2019, then the credit is allowed for wages paid to employees who did not work during the calendar quarter.

Refundable Credit

If it is determined the credit amount exceeds certain federal employment taxes, then the difference is treated as an overpayment and refunded to the business. It’s important to note any excess will first be applied to offset remaining employment tax liabilities prior to being refunded.

Contact Us

The Employer Retention Tax Credit can be claimed immediately by reducing the amount of employer social security tax by the amount of expected credit. However, it’s important to consult with a tax accountant to ensure accurate calculations have been determined. If you have questions about the information outlined above or need assistance with another tax issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to assisting you during this challenging time.