For businesses that didn’t receive funding under the Paycheck Protection Program, Congress has approved the Employee Retention Credit to help them pull through the economic impacts of COVID-19. Under the Coronavirus, Relief, and Economic Security Act (“the CARES Act”), qualifying businesses can receive this tax credit worth as much as $5,000 per employee that they continue to pay throughout the 2020 calendar year.
To qualify for the program, businesses just need to demonstrate either that your income has significantly declined or that you have had to partially/fully shutdown due to a government order related to COVID-19. Once a business qualifies, it can receive a tax credit equal to 50% of what it pays each of its employees up to a maximum of $5,000 per employee.
Here is the kicker — because this tax credit is fully refundable, if your tax credit does not equal your full deduction, you get the money back from the Government as an overpayment!
No one can even suggest that a tax credit alone cannot fully alleviate the struggles that some businesses are facing right now – however, this program will greatly help small businesses to retain and continue to pay their employees in the meantime, and impacted businesses should be on the lookout for these benefits when they report their quarterly employment tax returns throughout the rest of 2020. For more information, please visit https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act, and also consider contacting an experienced accountant or tax attorney to determine whether you qualify.