If you are not approved for the PPP or not applying for it, the Employee Retention Credit might be a great option for your business if you continue to have payroll costs.
Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either:
- Full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
- Significant decline in gross receipts versus the previous quarter (i.e. 50% decline of sales / gross receipts)
For each employee, wages (including certain health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit.
In order to claim the new Employee Retention Credit, eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns, which will be Form 941 for most employers, beginning with the second quarter. The credit is taken against the employer’s share of social security tax but the excess is refundable under normal procedures.
Action – Contact your payroll provider to take advantage of this tax credit for your business as the payroll provider is the one filing the form 941.
IRS Guidance – https://www.irs.gov/coronavirus/employee-retention-credit