What is Employee Retention Credit?
406 views | Last modified 4/5/2021 5:14:27 AM EST

Applicable To
94X 1099 W-2 ACA W-4

In March 2020, the US Government passed an Act, Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to reduce the impact of the economic downturn during this pandemic. One such provision under this CARES Act is the Employee Retention Credit. It is a refundable payroll tax credit against employment tax, which is 50% of the “Qualified Wages” paid to retain employees from March 12, 2020, to December 31, 2020. Beginning from January 01, 2021, employers can claim refundable tax credit against employment tax, which is 70% of the “Qualified Wages”. The qualified wages should not exceed $10,000 per employee per quarter.

Eligible employers until December 31, 2020 (Q2, Q3 & Q4 of 2020)

  • You are partially or entirely affected by this pandemic and cannot run your operations.
  • You have a massive decline in your gross receipts, which is nearly below 50% in the same quarter of 2019, you are eligible to claim this credit.

Eligible employers from January 01, 2021 (Q1 & Q2 of 2021)

  • You are partially or entirely affected by this pandemic and cannot run your operations.
  • You have a massive decline in gross receipts, almost 80% less than what your gross receipts were in the same quarter of 2019.

If you’re an eligible employer, you can reduce the upcoming employment tax deposits to get this credit. If you are unable to cover this credit with the employer’s employment tax deposits, you can request an advance payment from the IRS. For advance credit, file Form 7200 at TaxBandits and transmit to the IRS.

To find out more about the Employee Retention Credit, click here.
 

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