Employer Credit for Employee Retention

  By Lynn Connor  |    Wednesday April 2, 2020

Category: Expert Advice, Funding, Legal, Productivity


The United States Department of Treasury issued a press release yesterday to encourage businesses impacted by COVID-19 to use the Employee Retention Credit.  The credit was created to encourage firms to keep their employees on their payroll.  

Available to all employers regardless of size, the credit covers up to 50 percent of wages up to $10,000.  (Two exceptions: state and local governments and small businesses who take small business loans.)

To qualify, your business must be fully or partially suspended by government order due to COVID-19 during the calendar quarter and your gross receipts must be below 50 percent of the same quarter of 2019.  When receipts go above 80 percent, they no longer qualify after the end of that quarter.  

Your credit is 50 percent of qualifying wages paid up to $10K (not limited to cash payments but also include a portion of the cost you pay for employer provided health care) between 3/12/20 and 1/1/21.  

Qualified wages mean in 2019, if you had less than 100 employees on average, the credit is based on wages paid to all employees regardless if they worked or not.  If you had more than 100 employees on average in 2019, the credit is for wages paid to employees who did not work during the calendar quarter.

Eligible employers can immediately be reimbursed for their credit by reducing required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.  You will report total qualified wages and the related health insurance costs for each quarter on your quarterly employment tax returns or Form 941 beginning with the second quarter. And, if your employment tax deposits can’t cover the credit, you may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

COATS Staffing Software is reviewing and sharing relevant economic relief information due to COVID-19, applicable to our customers.  More information regarding this employer credit and additional economic relief efforts can be found on the Coronavirus page of IRS.gov 

If you have any questions that we may assist you with as it relates to COATS, please call us at 1-800-888-5894.

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