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COVID-19 - New IRS Credits For Business Employers!

Good news for small-midsize business employers! If your business has experienced hardship, created by the COVID-19 pandemic, the IRS has made three new tax credits available for eligible businesses.

If you are a small-midsize business employer, these new tax credits could be especially important and beneficial to your business because they have been created to help with COVID-19 hardships, like keeping employees on the payroll, in order to keep your business open during the pandemic.

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How Do the Credits Work?

Employee Retention Credit

If you are a qualified employer you can obtain a refundable 50% (percent) tax credit, of up to to $10,000 in wages paid to your employees (view IRS FAQ page).

You are considered a qualified employer if:

  • your business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
  • your gross receipts have significantly declined and are below 50% of the comparable quarter in 2019 (once your gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter).

You ARE NOT considered a qualified employer if:

  • your business is a federal, state and/or local government entity or instrumentality, and/or
  • your small businesses has received a small business loans under the Paycheck Protection Program.
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Paid Sick Leave & FMLA Credits

Sick Leave Employees

If you are an eligible employer you can receive a tax credit for any employee who is unable to work due to their own Coronavirus symptoms or medical diagnosis (quarantine or self-quarantine - view IRS FAQ page):

  • sick leave employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee's regular rate of pay up to $511 per day and $5,110 in total.
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FMLA Employee Use

You can also receive a tax credit for those employees who need to care for someone with the Coronavirus (i.e.; children - view IRS FAQ page):

  • employees who need to use Family Medical Leave (FMLA) are entitle to paid sick leave for up to two weeks (up to 80 hours), at 2/3 the employee's regular rate of pay or, up to $200 per day and $2,000 in total and also paid family and medical leave equal to 2/3 of the employee's regular pay, up to $200 per day and $10,000 in total. 
  • up to 10 weeks of qualifying leave can be counted towards the family leave credit.

What are the Ways in Which Your Business Can Receive the Credit?

Immediate Reimbursement

If your business needs immediate reimbursement, you can:

  • reduce your required deposits of payroll taxes that have been withheld from employees' wages by the amount of the credit (the refundable credit can be used for the period of April 1, 2020, through Dec. 31, 2020 and is applied against certain employment taxes on wages paid to all employees).

Report on Tax Returns or Form 941

If you do not need the credit immediately you can claim the credit on your federal employment tax return. So beginning in the second quarter, you can report your total qualified wages and the related health insurance costs, for each quarter, on your quarterly employment tax returns or on IRS Form 941.

Advance Payment Eligibility

If your employment tax deposits are not sufficient to cover the credit, then you might be able to receive an advance payment from the IRS by submitting the following:

  • Form 7200 ("Advance Payment of Employer Credits Due to COVID-19")
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Remember to Keep Records!

If you have or plan to use any of these credits, for your business, the IRS mandates:

  • you must keep records supporting the need and use of the credits... AND
  • you must retain all employment tax records for at least four years.

You can obtain more details and stay up to date with further actions taken by the IRS, concerning these tax credits, by visiting the IRS "Coronavirus Tax Relief & Economic Impact Payments" main website page.

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