If your clients have been adversely affected by the novel Coronavirus pandemic, you should know about three important new credit programs available from the IRS.
First up is the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll.
According to the IRS, this refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. The credit is available to all employers regardless of size.
Next, two credits related to employee leave: the Paid Sick Leave Credit and Family Leave Credit.
If an employee is undergoing coronavirus quarantine or self-quarantine –or has Coronavirus symptoms and is seeking a medical diagnosis – the Paid Sick Leave Credit can allow a business to get credit. Check the IRS website for details on pay rates for the Paid Sick Leave Credit – and see additional resources below.
The Family Leave Credit is for employers whose employees are unable to work due to caring for someone with Coronavirus, or for those caring for a child because the child's school or place of care is closed, or the paid childcare provider is unavailable due to the Coronavirus. Find specifics on the pay rates and limits directly from the IRS.
Employers can be immediately reimbursed for the credits by reducing their required deposits of payroll taxes that have been withheld from employees' wages by the amount of the credit.
Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer's employment tax deposits are not sufficient enough to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.