The shutdown of the Economy caused by the on-going pandemic brought about a heavy blow to both companies and individuals, so the United States Internal Revenue Service (IRS) launched a series of financial rescue plans. Recently, the United States Internal Revenue Service launched three new tax credits policies specifically designed to help companies survive the on-going pandemic.

The economic shutdown caused by the pandemic (COVID 19) really had a negative impact on both businesses and individuals nationwide, so the Internal Revenue Service recently launched a series of plans, ranging from small business loans to increasing unemployment subsidies, to help rescue people financially.

The IRS recently reminded small businesses that in the $2.2 trillion relief program introduced by the Corona Virus Assistance, Relief, and Economic Security Act (CARES Act), companies can enjoy three tax credit benefits. They include:

·  Employee retention tax credit

·  Paid sick leave tax credit

·  Family leave tax credit

These measures are specially designed to help companies pay necessary expenses to employees during this pandemic and maintain employment nationwide.

EMPLOYEE RETENTION TAX CREDIT

According to the IRS, the Employee Retention Tax Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. For qualified companies affected by the on-going pandemic, employees can retain their list of tax credits for full tax refunds to help companies continue to pay their employees. If the financial status of a qualified employer’s company is affected by the coronavirus, half of the salary paid by the company can be used as a tax credit, and the maximum tax credit for each employee is $10,000 (hence the maximum tax credit $5,000 per employee because of the 50%).

Eligibility   

For the business to be qualified for this credit, the business of a company must be during the on-going pandemic, the employer’s quarterly total revenue must be “less than 50% of the same period in 2019.” If the quarterly total revenue exceeds 80% of the same period in 2019, the enterprise will lose the eligibility to enjoy the discount after the end of the quarter.

The company must have fully or partially suspended business operations during any quarter in 2020 due to the coronavirus.

According to the United States Internal Revenue Service, qualified employers receive tax credits for wages paid after March 12, 2020 and before January 1, 2021. It is also important to know that this recent tax benefit applies to all types of companies, including charitable establishments.

However, state and local governments (and their related agencies), as well as companies that have already received loans from small businesses such as the “Pay Protection Scheme”, are not eligible for the discount. Many struggling employers can get access to the Employee Retention Tax Credit by reducing upcoming deposits or requesting an advance credit onIRSForm 7200 (Advance of Employer Credits due To COVID-19).

Note

Self-employed individuals cannot claim the Employee Retention Tax Credit for their self-employment earnings or services.

 

PAID SICK LEAVE TAX CREDIT AND FAMILY LEAVE TAX CREDIT

If employees are unable to work even if it includes remote work due to quarantine orders given by the federal government or self-quarantine, or are exhibiting symptoms of the coronavirus infection and they are waiting to be diagnosed, or are caring for someone who is subject to a federal, state, or local quarantine order related to COVID-19, employers can obtain paid sick leave tax credits. According to the regulations provided by the Internal Revenue Service, such employees are entitled to a maximum of 10 days (80 hours) of full-pay sick leave, with a daily salary not exceeding $511 and a total amount not exceeding $5,110. According to the IRS, the Families First Coronavirus Response Act (FFCRA) which was signed by President Trump on March 18, 2020, provides small and midsize employers refundable tax credits that reimburse them, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. The FFCRA gives funds to businesses with fewer than 500 employees to provide them with paid sick and family and medical leave for reasons related to COVID-19, either for the employee’s own health needs or to care for family members.

Employers can also enjoy the Family Leave Tax Credits if employees cannot take care of their children because they need to take care of their family members with new corona pneumonia, or because the school or kindergarten is closed, or the child care staff they paid for cannot pay for the on-going pandemic. The Internal Revenue Service stated that such employees can receive up to two weeks (80 hours) of paid sick leave at a rate of 2/3 of their normal salary, not exceeding $200 per day, and not exceeding $2,000 in total.

Qualified employers can also enjoy tax credits payments if employees can enjoy paid family leave and sick leave at a rate of 2/3 of the normal salary level, not exceeding $200 per day and the total amount not exceeding $10,000. In addition to this, the Internal Revenue Service said that Up to 10 weeks of eligible leave can be counted as a Family Leave Tax Credit.

Enterprises and establishments entitled to paid sick leave and family leave tax credit must have no more than 500 employees and according to the Families First Coronavirus Response Act; they must pay qualified sick leave/family leave Employee salary.

The IRS stated that if the employer meets the requirements, the wages paid during the qualified sick leave and family leave can be immediately deducted from the taxes and fees, including the relevant medical insurance expenses and the relevant medical insurance expenses between April 1, 2020 and December 31, 2020. Employers should pay medical insurance taxes related to vacations. The refundable tax credit applies to the individual employment tax payable on wages paid to all employees.

The Internal Revenue Service states that employers can deduct “amounts equal to the credit” from wage tax deposits “withheld from employees’ salaries” and immediately enjoy certain tax credit benefits.

If a qualified employer wants to obtain a tax credit, it must first start in the second quarter, using its quarterly employment tax return or the IRS Form 941, to declare the total amount of qualified wages and related medical insurance expenses for each quarter.

If the employer’s employment tax deposit is not enough to pay the credit, you can submit the IRS Form 7200 to obtain the tax credit prepaid by the IRS (the employer can also submit the form to apply for the IRS prepaid employee retention tax credit).