Employee Retention Tax Credit

Congress has created a refundable payroll tax credit for businesses (large and small) and non-profits that retain their employees during the COVID-19 crisis. The tax credit is equal to 50 percent of wages and compensation. There is an overall limit on credit value per employee of $10,000. The credit is provided through December 31, 2020.

Eligibility

Employers are eligible if they have been fully or partially suspended as a result of a government order, or if they experience a 50 percent reduction in quarterly receipts as a result of the crisis. 

Amount of Tax Credit

  • For eligible employers with 100 or fewer full-time employees, they may claim a credit for wages paid to all of their employees, up to $10,000 a person. 

  • For eligible employers with more than 100 employees, they may claim a credit for only those employees who are furloughed or face reduced hours as a result of the employer’s closure or economic hardship. 

Applying the Tax Credit

The credit can be claimed against the business or non-profit’s quarterly payroll tax liability and is fully refundable to the extent that it exceeds that liability. The Department of the Treasury is authorized to make advance payments of the tax credit, and to waive penalties for employers who do not deposit applicable payroll taxes in anticipation of receiving the credit.

Limitations

This tax credit is not available if the employer takes an SBA Paycheck Protection Program loan. More information about the SBA Paycheck Protection Program is available here.

More Information

As more information about this tax credit becomes available, please check the IRS’s website at https://www.irs.gov/coronavirus.

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