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When COVID-19 began affecting businesses across the nation earlier this year, the U.S. government quickly responded by introducing several pieces of legislation to provide some financial assistance for employers, including the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act. As we approach year-end, many U.S. employers and their employees continue to be impacted by the virus, and some tax credits created as part of these acts are expected to sunset.
Doeren Mayhew’s tax advisors highlight three COVID-19-related tax credits small businesses (fewer than 500 employees) should take advantage of before year-end:
1. Paid Sick Leave Refundable Credit: Under the Emergency Paid Sick Leave Act (EPSLA) as part of the FFCRA, employees are entitled to paid sick time (up to 80 hours) if they are unable to work for certain reasons related to COVID-19. Below is an overview of employer tax credits available:
a. Sick and Family Leave: Up to $511 per day while the employee is receiving paid sick leave to care for themselves, but no more than $5,110 in total.
b. Caring for Someone with Coronavirus: Up to $200 per day if the sick leave is to care for a family member or child if their school is closed, but no more than $2,000 in total.
2. Paid Family Leave Refundable Credit: In addition to the paid sick leave credit, under the expanded Emergency Family and Medical Leave Expansion Act (Expanded FMLA), an employee who is unable to work (including telework) because of a need to care for a child whose school or place of care is closed or whose childcare provider is unavailable due to COVID-19, is entitled to paid family and medical leave equal to two-thirds of the employee’s regular pay. Employers are entitled to a fully refundable tax credit of up to $200 per day and $10,000 in total.
3. Employee Retention Credit: Businesses (including tax-exempt organizations) whose operations were fully or partially suspended due to COVID-19 or experienced a 50% decline in gross receipts during a calendar quarter compared to the same quarter in 2019, are eligible for a fully refundable tax credit equal to 50% of qualified wages paid to their employees. This credit applies to qualified wages paid after March 12, 2020, and before Jan. 1, 2021.
Employers should also take advantage of the payroll tax deferral opportunity if they have not done so already. The CARES Act permits employers to defer the deposit and payment of their portion of social security taxes that would have been due between March 27, 2020, and Dec. 31, 2020. Instead, employers can deposit half of these deferred payments by the end of 2021 and the other half by the end of 2022.
Doeren Mayhew remains committed to identifying opportunities to alleviate the financial stress caused by COVID-19. For more tax planning assistance or to further explore these credits, contact us today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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