The Taxpayer Certainty and Disaster Tax Relief Act of 2020 modified and extended the CARES Act of 2020 to allow employers who received a PPP Loan in 2020 to become eligible for Employee Retention Credits. The CARES Act provides a refundable payroll tax credit for each calendar quarter in 2020, beginning with March 12 through December 31, equal to 50 percent of wages paid to employees during the COVID-19 pandemic, based on employer eligibility and employee threshold requirements.
Employers may be considered eligible if they fully or partially suspended operations during any calendar quarter in 2020 due to a governmental authority limiting commerce, travel, or group meetings due to COVID-19 or if the employer experienced a significant decline in gross receipts (more than 50%) compared to the same quarter in 2019.
The payroll tax credit is based on qualified wages paid to employees for the first $10,000 in compensation paid to eligible employees (including employer health expenses). If an employer received a PPP loan in 2020 and used employee wages to obtain PPP loan forgiveness, those wages cannot be used towards Employee Retention Credit qualified wages. The maximum tax credit for 2020 is $5,000 per employee.
For employers with 100 or fewer full-time employees in 2019, all employee wages are eligible for the 2020 credit. For employers more than 100 full-time employees in 2019, qualified wages are those paid to employees when they are not providing services to the employer.
We recommend you consult with your accountant and/or tax advisor to confirm if you are eligible to request the Employee Retention Credits for 2020. If, after consulting with your accountant and/or tax advisor, you have determined you are eligible for 2020 Employee Retention Credits, we can compute the credit and prepare the appropriate amended tax returns.
Here is how the process works:
- Once we receive your request about employee retention credit, we will send a form that must be fully reviewed.
- Please note that this form will advise your company to seek the advice of their accountant and/or tax advisors to determine eligibility for the credits.
- Should you decide to move forward, you will then have two service options to choose from on the form and the form must be returned to the Tax Department at tax@payprocorp.com.
Please let us know ​​​if you have any further questions.
Sincerely,
Kenneth R. Porcelli, CPA, President and COO