![]() The credit cannot be taken with certain other benefits, including those provided by Congress in response to COVID-19. In both cases, wages include properly allocable health plan expenses. In contrast, for those with 100 or fewer full-time employees, all wages paid during the period an employer is eligible for the credit can be taken into account. In general, for an eligible employer with more than 100 full-time employees, the only wages that can be taken into account are those paid for the time employees are not providing services during the period the employer is eligible for the credit. The wages eligible for the credit depend on an employer’s average number of full-time employees in 2019. ![]() The credit is generally available to businesses either fully or partially suspended due to a government order or those that saw a greater than 50% reduction in gross receipts in a 2020 quarter compared to the same quarter in 2019. The credit applies against the employer’s 6.2% share of Social Security tax, but it is fully refundable and covers 50% of qualified wages up to $10,000 per employee. Businesses should carefully consider whether they are eligible for the credit, particularly in light of the aggregation rules, and which wages qualify.īackground Congress included the ERC in the CARES Act to encourage businesses to retain employees. The ERC presents a significant opportunity for organizations to reduce their payroll tax burden and receive refunds, but the credit may conflict with other benefits provided in response to the pandemic. ![]() The FAQ provides clarity to many of the open issues taxpayers were facing when determining whether they could benefit from the ERC, but unanswered questions remain. Under the ERC, eligible employers may qualify for a fully refundable credit of up to $5,000 against Social Security taxes for certain employees retained during the COVID-19 pandemic. ![]() The FAQ addresses nearly all aspects of the ERC and clarifies several issues regarding eligibility for the credit and which wages and health plan expenses count toward it. The IRS has released guidance in the form of 95 frequently asked questions (FAQ) on the employee retention credit (ERC) enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. ![]()
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