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April 26, 2020
The Coronavirus Aid, Relief and Economic Security (CARES) Act creates a payroll tax credit designed to provide financial incentives for businesses to keep employees on their payroll during the COVID-19 crisis.
Businesses qualify if they are partially suspended, completely suspended or even closed as a result of a quarantine, isolation order or “safer-at-home” order. This credit is available for wages paid from March 13, 2020 through December 31, 2020. Wages earned before March 13, 2020 qualify if they were paid on or after March 13, 2020.
To help provide insight into the complexities of this legislation, Harris Shelton attorneys have broken down Retention Credit eligibility, exclusions and more:
What is the Tax Credit Amount?
The Retention Credit is for 50% of qualifying wages paid by the employer during an eligible calendar quarter. Businesses can apply the Retention Credit up to $10,000 per employee in total.
How Does Employer Size Affect Eligibility?
For businesses with 100 or fewer employees, all wages for the time period in which the business is affected can be credited.
For businesses with more than 100 employees, only wages paid to employees who are not providing services to their employer qualify. Full-time employees are defined under the same criteria as the Affordable Care Act, meaning that an employee must work at least 30 hours per week on average in a month.
Who is Eligible?
Only nongovernmental businesses are eligible for the Retention Credit. Eligibility will be determined for each business on a quarterly basis. There are two ways to reach eligibility:
What are the Qualifying Wages, Limitations, and Exclusions?
There are still many questions about how the Retention Credit will work and whether certain employees will qualify. For instance, it’s unknown whether the wages of employees of large employers who are providing some – but not all – of the services they usually provide qualify for the Retention Credit. Further guidance by the IRS will be crucial to understanding the nuances of the Retention Credit.
If you or your business are in need of legal guidance regarding recent COVID-19 legislation, please contact Harris Shelton, a full-service law firm, today.