In response to COVID-19 the Treasury Department and the Internal Revenue Service launched the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll. The 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, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.
Qualifying employers must fall into one of two categories:
- The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
- The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
These measures are calculated each calendar quarter.
More information on the Employee Retention Credit under the CARES Act can be found here: https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
As part of a larger effort to help taxpayers dealing with COVID-19, the IRS has created IRS.gov/coronavirus with special informational graphics about the upcoming economic impact payments that can be shared with your employees and clients or posted on your websites.