IRS Three Credits for Businesses Hit by Coronavirus; The Internal Revenue Service (IRS) three new credits are available to the businesses and employers affected by COVID-19 pandemic. Go through the given details to know details of important IRS three credits for businesses hit by coronavirus. These credits include Employee Retention Credit, Paid Sick Leave Credit and Family Leave Credit to the businesses hit by COVID-19 in USA.
Employee Retention Credit
In order to keep employees on their payroll, the IRS designed Employee Retention Credit to encourage businesses and employers to do so. As per the details, those businesses who has been financially impacted by COVID-19 can get the refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer. The IRS offers Employee Retention Credit to all employers regardless of size. Tax-exempt organizations are also included in the list of businesses eligible for Employee Retention Credit. The IRS made two exceptions which include State and local governments and their instrumentalities as well as small businesses who take small business loans. An advance of the Employee Retention Credit can also be requested by the eligible employers by submitting Form 7200.
Among the IRS three credits for businesses hit by coronavirus, Employee Retention Credit is on top of the list for employers. Qualifying employers for Employee Retention Credit must fall into any of the following categories:
- The employer’s business is fully or partially suspended by U.S. government order due to COVID-19 during the calendar quarter.
- The employer’s gross receipts are below 50% of the comparable quarter in 2019. If the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify for Employee Retention Credit after the end of that quarter.
Employers will calculate the above measures each calendar quarter. Along with it, the IRS also unveiled New People First Initiative for COVID-19 that suspends key compliance, slows audits and eases installments due. In order to get complete information and FAQ’s related to Employee Retention Credit, please click here.
Paid Sick Leave Credit and Family Leave Credit
The IRS designed Paid Sick Leave Credit among the other IRS three credits for businesses hit by coronavirus to allow businesses to get a credit for an employee who is not able to work (including telework) due to Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis. These employees qualify to obtain paid sick leave for up to 10 days (which is equal to up to 80 hours) at the employee’s regular rate of pay up to $511 per day and $5,110 in total.
Not only this, the employers can also get the credit for those employees who are not able to work because of caring for someone with Coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable as a result of the Coronavirus pandemic. These employees qualify to obtain paid sick leave for up to two weeks (which is equal to up to 80 hours) at 2/3 the employee’s regular rate of pay or, up to $200 per day and $2,000 in total.
Along with it, the employees are also eligible to get paid family and medical leave equal to 2/3 of the employee’s regular pay, up to $200 per day and $10,000 in total. In case of Family Leave Credit, up to 10 weeks of qualifying leave can be counted.
By reducing the required deposits of payroll taxes, employers can be reimbursed immediately for the credit. It must be noted that payroll taxes to be reduced are those that have been withheld from employees’ wages by the amount of the credit.
Eligible employers can quickly receive IRS three credits for businesses hit by coronavirus. They can also receive the credit which is equal to the full amount of the required sick leave and family leave along with related health plan expenses and the employer’s share of Medicare tax on the leave, for the period of April 1, 2020, through Dec. 31, 2020. Along with it, the IRS has also allowed High-Deductible Health Plans to cover coronavirus costs. The refundable credit is applied against specific employment taxes on wages paid to all employees. In order to get the complete details of Paid Sick Leave Credit and Family Leave Credit via Families First Coronavirus Response Act, please click here.
How Will Employers Receive IRS Credits For Coronavirus?
Employers are encouraged to reduce their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit in order to immediately reimburse for the credit. Eligible employers to receive credits are instructed to report their total qualified wages in addition to the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. An advance payment can also be received by the employer if his employment tax deposits are not enough to cover the credit. This can be done by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.
The IRS is also sending Economic Impact Payments to most of the taxpayers and even to those who are not required to file their tax returns. Contact us to know all coronavirus tax relief program by U.S. government agencies, particularly IRS and Treasury along with the above IRS three credits for businesses hit by coronavirus.