INCOME TAX INSIGHTS | COVID-19 EMPLOYEE RETENTION TAX CREDIT
The IRS has issued the Employee Retention Credit, which is designed to encourage employers to keep employees on their payroll. The tax credit is 50% of up to $10,000 of qualified wages paid to employees.
Your company may be eligible if you are experiencing economic hardship related to COVID-19. The tax credit is for wages paid by an employer from March 31, 2020 through to December 31, 2020.
For the most part, the credit is available to all employers regardless of size, including tax-exempt organizations. However, the IRS does have some requirements. As an example, to be eligible employers must fall into one of two categories:
- The employer’s business is fully or partially suspended by a government order due to COVID-19 during the calendar quarter.
- The employer has a significant decline in 2020 gross receipts, which are below 50% of the same quarter in 2019.
It is important to note that the qualified wages paid by an eligible employer include related qualified health plan expenses and vary based on the average number of employees in 2019.
Note: It is important to view the entire IRS tax credit requirements and or consult with your tax advisor for tax planning advise.
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