Employee Retention Credit (ERC) Available for Businesses through CARES Act
(Florence, SC – March 30, 2020) – On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide emergency assistance for individuals, families and businesses affected by the 2020 coronavirus pandemic. Among numerous other provisions, the CARES Act includes an employee retention credit that is available to employers.
The Employee Retention Credit (ERC) is a credit against an employer’s portion of payroll tax for an eligible business that is forced to suspend or close operations due to COVID-19, or otherwise has a significant revenue decrease, and continues to pay its employees while not currently working.
A business is eligible for the credit in one of two ways:
- Business operations were fully or partially suspended during any quarter of 2020 due to orders from an appropriate governmental authority that limited commerce, travel or group meetings resulting from COVID-19; or
- The business remained open but during any quarter in 2020 experienced a year-over-year (comparing calendar quarters) reduction in gross receipts of at least 50%. The business will then be entitled to the credit for each quarter until gross receipts for a quarter exceed 80% of receipts from the same quarter in 2019.
Tax-exempt organizations may also qualify for the ERC based on the guidelines above. However, businesses that received a loan under Section 7(a) of the Small Business Act are not eligible for the ERC.
The one-year only tax credit goes against the employer’s 6.2% share of Social Security payroll taxes equal to 50% of “qualified wages” paid to each employee, ending on December 31, 2020. The business’s qualified wages depend on its size:
- If the business had more than 100 employees in 2019, the qualified wages are limited to only those wages paid by the employer during the quarter for the period of time when the business was shut down.
- If the business had fewer than 100 employees in 2019, the qualified wages include wages paid when the business was shut down but also wages paid during each quarter where there was a sharp decline in year-over-year receipts.
In both cases, qualified wages include any “qualified health plan expenses” allocable to the wages, such as amounts paid to maintain a group health plan. The amount of qualified wages for each employee for all quarters may not exceed $10,000. Additionally, any wages used in determining the new payroll tax credit for family medical leave or sick leave under the Families First Coronavirus Reponses Act may not be considered in determining qualified wages for the credit.
The ERC is only available for wages paid after March 12, 2020, and before January 1, 2021, and is refundable to the extent it exceeds the business’s payroll tax liability.
Synergi Partners is prepared to guide employers through this process. Synergi Partners has developed a proprietary methodology called “Operational Impact Analysis” which evaluates the totality of business impact, including revenue loss, on an individual company basis.
For more information on how to take advantage of these valuable tax credits, please contact Synergi Partners.
About Synergi Partners
Comprising of tax credit veterans with many years of experience serving clients of all sizes and in virtually all industries, Synergi Partners specializes in helping employers take advantage of federal and state tax credit programs, as well as disaster relief incentives.
With an executive team made up of thought leaders who have made significant contributions to the tax incentives industry, Synergi Partners’ main goal is to provide the best service available and to achieve maximum value for its clients.