Everything You Need to Know About COVID-19 Employment Tax Credits
1.) A refundable tax credit (Employee Retention Credit) for 50% of wages (up to $10,000 of
wages per employee) paid during the COVID-19 period (March 12, 2020-December 31,
2020) will be allowed. This credit applies to ALL employee wages for eligible employers with 100 or fewer full-time employees.
a.) Applies when operations are fully or partially suspended under orders from an
appropriate governmental authority limiting commerce, travel, or group meetings, OR
b.) Gross receipts for a calendar quarter are less than 50% for the same quarter of the
previous year and continues each quarter until gross receipts for the calendar quarter
are greater than 80% of the same quarter of the previous year. (This could include
1st, 2nd, 3rd and 4th quarters of 2020.)
c.) Non-profits carrying on a trade or business with suspension of business operations
under a governmental order will include ALL operations of the non-profit entity.
d.) An employer is not eligible for this credit is it receives a covered “interruption” loan
under Sec 1102 of the CARES Act, specifically Personal Paycheck Protection loans.
2.) A refundable tax credit (Emergency Family and Medical Leave) for 100% qualified
family leave and sick pay (up to $10,000 of wages per employee) will be allowed for
payments from April 1, 2020 through December 31, 2020. This credit applies to employers with fewer than 500 employees.
a.) Most employers MUST provide public health emergency leave to employees under
the Family and Medical Leave Act of 1993 as amended by the Families First
Coronavirus Response Act.
b.) Employers with fewer than 50 employees will be eligible for an exemption from the
leave requirements related to school closings or childcare unavailability if the
requirements would jeopardize the business’s ability to continue.
c.) Only wages paid to employees when they are not providing services due to the
COVID-19 related circumstances will qualify.
d.) Wages paid under this act are NOT considered wages for FICA purposes. The
credit is increased by the employer’s share of Medicare tax and the employer’s
qualified health plan expenses properly allocable to the qualified sick leave wages or
the qualified family leave wages.
e.) The claimed credit amount is included in the employer’s gross income.
f.) An employer may elect to not have the credit apply for a calendar quarter. An
election must elect out at the time and manner provided by the IRS (probably a
statement attached to the 941 return or a new check box on the form).
g.) Employers may reduce the required payroll tax deposits by the amount of the
expected credit. If the expected credit exceeds the required payroll tax deposit
amount, a request for an accelerated advance payment can be filed, which the
IRS expects to process withing two weeks or less.
h.) Includes employees who cannot work, but must care for a child under age 18
because either the child’s school or place of care has been closed due to COVID-19
circumstances, or the care provider is unavailable due to COVID-19 circumstances.
i.) Only employees that have been on the job for at least 30 days can be considered.
j.) Up to 10 days of sick leave and 50 days of family leave can be included. The first 10
days may be unpaid.
k.) Amount cannot exceed the amount each employee would have been paid for
working an equivalent duration during the 30 days immediately preceding the
particular period or $200 per day. The maximum amount is increased to $511 per day
1) is subject to a federal, state, or local quarantine or isolation order related to
COVID-19, 2) has been advised by a health care provider to self-quarantine due to
concerns related to COVID-19, or 3) is experiencing symptoms and seeking a
l.) Self-employed persons can receive a similar credit for 67% of the average self- employment income (annual SE income divided by 260 days) for the tax year, not to
exceed $200 per day (up to 50 days), reduced by any family leave wages received
from an employer.
3.) Additional rules for both credits
a.) Credits are refundable. Expected credit can be used to reduce federal tax deposits
of the entity or estimated income tax payments of an individual.
b.) Number of employees is determined from 2019 full-time employees (not full-time
equivalents) averaging at least 30 hours per week during 2019.
c.) Total credit cannot exceed $10,000 for each employee.
Michael Gunckel, CPA
Succentrix Business Advisors
671 East Riverpark Lane,
Suite 120B Boise, ID 83706