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COVID-19

Determine Your Eligibility for the Employee Retention Credit

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

You can use this new tool to help determine if you qualify for the Employee Retention Credit.

 

The coronavirus (COVID-19) pandemic has presented a number of challenges to employers trying to keep their businesses afloat and keep their employees on the payroll. Some now see signs of hope as certain shutdown restrictions are being removed in cautious stages throughout the United States so employers can begin to resume operations.

Employee Retention Credit (ERC)

During the height of the COVID-19 pandemic, the federal government acted with new legislation that provides economic relief to employers and employees.  The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on March 27, 2020 and contains a provision that provides a refundable tax credit against certain employment taxes equal to 50% of the qualified wages (maximum of $10,000 per eligible employee) an eligible employer pays to employees after March 12, 2020 and before January 1, 2021. This is called the Employee Retention Credit (ERC).

Unfortunately, not every employer is eligible for the ERC. For example, if an employer receives a Paycheck Protection Program (PPP) loan, which is also a provision of the CARES Act, the employer does not qualify for the ERC.  To determine ERC eligibility, an employer must also determine if its business suffered a full or partial shutdown or a significant decline in gross receipts. Furthermore, an employer needs to know what wages qualify for the credit – having more than 100 full time employees is more limiting for what wages qualify for the ERC than employers with 100 or fewer employees. And finally, there’s how to claim the credit.

New ERC tool

To help employers navigate the ERC qualification process, Thomson Reuters has developed a free, easy-to-use ERC tool that walks an employer through each step of the process. It begins with an overview page summarizing the ERC. Next, it asks specific questions to aid an employer in determining if it qualifies for the ERC and how to claim the credit. There are important links to IRS frequently asked questions (FAQs) to assist an employer in figuring out if it suffered a full or partial suspension of business operations or suffered a significant loss in gross receipts. After an employer proceeds through the steps and answers the questions, the tool provides a report for review and also a link to free Checkpoint Edge COVID-19 resources. Users may use the tool to run through the qualification steps as many times as they need.

Calls to expand the ERC

There have also been calls for an expansion to the ERC. The HEROES Act passed the U.S. House of Representatives on May 15, 2020 and contains provisions that would increase the applicable percentage of qualified wages from 50% to 80%. The JOBS Credit Act was also introduced in the House in May 2020.  It includes a similar provision that would increase the percentage from 50% to 80%, among other things.

If any of these measures are enacted, it could mean more employers qualify for the ERC.  It would also likely mean more information to consider regarding how an employer may qualify for the credit.

Consider subscribing to Checkpoint payroll news to keep up with any changes that may come down the road.  In the meantime, please take advantage of the free ERC tool and access to the Checkpoint Edge COVID-19 resources.

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