The CARES Act (COVID-III), which was signed into law on March 27, 2020, provides tax relief that will help certain small businesses with cashflow and liquidity needs, including deferred tax payments and direct payments. It is important to recognize that utilizing other provisions of the law disallows the use of some of these provisions, including the Paycheck Protection Program (forgivable loans).
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Business Provisions
Employee retention credit for employers subject to closure due to COVID-19.
• The CARES Act creates a payroll tax credit for 50% of eligible wages, up to $10,000 per employee, for 2020 during the COVID-19 pandemic.
• Excess of credit over payroll tax liability is refundable. • Business eligibility – o The business’s operations are partially or fully suspended due to Federal, State, or Local government orders related to the COVID-19 pandemic, or o Gross receipts from the calendar quarter (started on January 1, 2020) are less than 50% of gross receipts from the same calendar quarter in 2019.
• What are qualified wages? o For eligible employers with 100 or fewer full-time employees, qualified wages include all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020. o For employers with more than 100 full-time employees, qualified wages include wages paid to employees who are unable to work due to the COVID-19-related circumstances Tax Provisions for Businesses and Individuals Visit NFIB.com/Coronavirus 3/27/2020 5:00 PM described above. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
• Important caveats: o Employers that receive a Paycheck Protection Program forgivable loan or a Small Business Interruption loan are not eligible for the credit. o Qualified wages do not include wages taken into account for purposes of the payroll credits for required paid sick leave or required paid family leave, nor for wages taken into account for the employer credit for paid family and medical leave (IRC sec. 45S).
• Credit expires on December 31, 2020.
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