Many businesses that have been severely impacted by coronavirus (COVID-19) will qualify for two new employer tax credits – the Credit for Sick and Family Leave and the Employee Retention Credit, both a result of the new CARES Act. McConnell & Jones is keeping a close eye on the tax provisions and although regulations are quickly evolving, our team is available to assist with tax compliance questions and can help you maximize credits available as a result of the CARES Act.
Sick and Family Leave Credit
An employee who is unable to work (including telework) because of coronavirus quarantine or self-quarantine or has coronavirus symptoms and is seeking a medical diagnosis, is entitled to paid sick leave for up to ten days (up to 80 hours) at the employee’s regular rate of pay.
Eligible employers are entitled to receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and the employer’s share of Medicare tax on the leave, for the period of April 1, 2020, through December 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees. Eligible employers can reduce federal employment tax deposits in anticipation of the credit. They can also request an advance of the paid sick and family leave credits for any amounts not covered by the reduction in deposits. The advanced payments will be issued by paper check to employers.
Employee Retention Credit
Eligible employers can claim the employee retention credit, a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages (including health plan expenses), paid after March 12, 2020 and before January 1, 2021. Eligible employers are those businesses with operations that have been partially or fully suspended due to governmental orders due to COVID-19, or businesses that have a significant decline in gross receipts compared to 2019.
The refundable credit is capped at $5,000 per employee and applies against certain employment taxes on wages paid to all employees. Eligible employers can reduce federal employment tax deposits in anticipation of the credit. They can also request an advance of the employee retention credit for any amounts not covered by the reduction in deposits. The advanced payments will be issued by paper check to employers.
If you have questions about the tax provisions around COVID-19 and the CARES Act our team is ready to help you. We are working with several clients to provide high-level tax advisory and business planning services. Our team is managed remotely, and our engagements are completed virtual through cloud-based tools and fully encrypted software which protects your information.