Federal Tax Credits Intended to Free Up Cash Now

U.S. TREASURY: Employee Retention Tax Credit. Provides refundable payroll tax credit to employers that are fully or partially shut down due to COVID-19 or whose gross receipts decline by 50% or more compared to same quarter last year. Tax credit is equal to 50% of qualifying wages paid to employees after March 13th with a maximum credit per employee of $5,000. An employer who qualifies because its gross receipts declined by 50% or more will not be eligible for the tax credit once its gross receipts reach 80% of what they were in same quarter in 2019. Eligible employers can take advantage of the credit immediately by reducing payroll tax payments by eligible credit amount. If the employer is eligible for a tax credit that is larger than its payroll tax liability, it receives a refund to the extent credit exceeds that amount.  (Tax credit is NOT available to organizations that receive PPP or other SBA loans. So, employers that intend to apply for PPP loan should not reduce or discontinue making payments for employee payroll taxes because credit is already incorporated into PPP loan.)

  • NOTE: On morning of Monday, April 6, an application process to obtain the Employee Retention Tax Credit is not yet available. Check here for updates.

U.S. TREASURY: Families First Coronavirus Response Act (FFCRA) FAQ. Provides small and midsize employers with a refundable tax credit. Employers can use the tax credits, on a dollar for dollar basis, for their costs associated with providing COVID-19-related paid sick and family leave wages. These tax credit programs are known as the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (Expanded FMLA). U.S. Department of Labor  also has details about these tax credits