The employee retention tax credit aimed at helping businesses hit hard by the coronavirus pandemic will be extended and expanded under the new stimulus bill recently passed by Congress and awaiting President Trump’s signature.
Current Benefits From April 2020 Stimulus
As discussed in two previous Gould & Ratner articles on CARES Act tax relief and COVID-19 tax credit details and instructions, under current law, employers whose trade or business operations were fully or partially suspended due to COVID-19, or whose gross receipts for a calendar quarter beginning after Dec. 31, 2019, are less than 50% of gross receipts in the same calendar quarter for the prior year, are eligible for a credit against employment taxes up to 50% of wages paid to employees after March 12, 2020, and before Jan. 1, 2021, not to exceed $10,000 with respect to any employee for all calendar quarters.
Under current law, employers with more than 100 full-time employees in 2019 are eligible for the credit for wages paid to employees who are not providing services due to suspension or slowdown of business. Employers with 100 or fewer full-time employees in 2019 are eligible for the credit for wages paid to employees during the period operations were suspended or the period of the decline in gross receipts. In addition, for those employers, the credit for wages during such period is available for wages paid to employees who are performing services. Expenses that qualify for the credit include amounts paid or incurred by an employer to provide and maintain a group health plan. Additionally, under current law, an employer who received a Paycheck Protection Program (PPP) loan under the CARES Act is not eligible for the credit.
Changes Under New Stimulus Plan
The new stimulus bill passed by Congress this week extends the timeframe in which eligible wages can be paid to July 1, 2021, and expands the current credit as follows:
If you have questions about the proposed expansion of the employee retention tax credit, please do not hesitate to contact one of the attorneys in Gould & Ratner’s Tax Planning and Compliance Practice.