COVID-19 Employer Tax Credit under the CARES Act

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COVID-19 Employer Tax Credit under the CARES ActLast Update 4/17/2020 – We are continuing to monitor and update this blog as information is released.

On March 31, the IRS released a series of FAQ’s and information regarding the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Most importantly, they released some information regarding the employer tax credits associated with this Act.

Note that this is unrelated to the dollar-for-dollar payroll tax credit that can be taken for FFCRA leave. Learn more about the FFCRA tax credit here.

CARES Act Employer Tax Credit

In case you are unfamiliar with the CARES Act, it is specifically designed to encourage eligible employers to keep employees on their payroll during the COVID-19 pandemic. By doing so, the employer could receive a retention credit equal to 50% of qualified wages paid. The maximum amount of qualified wages paid per employee for a calendar quarter is $10,000, so the maximum credit per employee is $5,000. This credit extends from March 12, 2020 to January 1, 2021.

The IRS released information regarding the CARES Act employer tax credit on the Quarterly 941 and they state, “The Coronavirus Aid, Relief, and Economic Security (CARES) Act supports certain employers that operate a business during 2020 and retain employees, despite experiencing economic hardship related to the COVID-19 crisis, with an employee retention credit. The refundable tax credit is equal to 50% of qualified wages paid to employees after March 12, 2020, and before January 1, 2021. If you paid any qualified wages between March 13, 2020, and March 31, 2020, inclusive, you will include 50% of those wages together with 50% of any qualified wages paid during the second quarter of 2020 on your second quarter Form 941, 941-SS, or 941-PR to claim the employee retention credit. Do not include the credit on your first quarter Form 941, 941-SS, or 941-PR.”

Any qualified wages paid from March 12 to March 30, will be added to your Quarter 2 Form 941. They will not be added to your Quarter 1 Form 941. This is regarding the CARES Act only.

The only thing that has not been released is where specifically you will put the credits. It is unknown at this time if they will release a new 941 with a new line for these specific credits or if the credits will be added in lines 7-9.

Integrity Data's COVID-19 Response Task Force

Our task force is monitoring the situation and will continue to update you as information is released. In the meantime:

Don’t hesitate to contact us with any questions, we are here to help you and your business through this difficult time.

Written by Integrity Data

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