CARES Act

Employee Retention Credit

The CARES Act grants eligible employers a credit against employment taxes equal to 50 % of qualified wages paid to employees who are not working due to the employer’s full or partial suspension of business or a significant decline in gross receipts. The credit can be claimed on a quarterly basis, but the amount of wages, including health benefits, for which the credit can be claimed is limited to $10,000 in aggregate per employee for all quarters.

An eligible employer is defined as:

• An employer whose trade or business is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease (COVID-19); or

• An employer that experiences a 50% decline in gross receipts for the calendar quarter compared to the same quarter in the prior year.

Qualified Wages. The credit applies to qualified wages paid after March 12, 2020 and before January 1, 2021.  If the employer has 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order.

Payroll Tax Payments

The CARES Act also defers the payment of payroll taxes. Payroll taxes due from March 27, 2020 and ending on December 31, 2020, may be deferred. The deferral applies to the employer portion of the portion of Social Security payroll taxes. Half of the deferred taxes are due on or before December 31, 2021, and half are due on or before December 31, 2022.

Self-Employment Tax Payments

The CARES Act also defers the payment of 50 percent of the equivalent self-employment tax.  Self-employment taxes due from March 27, 2020 and ending on December 31, 2020, may be deferred.  Half of the deferred taxes are due on or before December 31, 2021, and half are due on or before December 31, 2022.

Cherina DK Hart, CPA