Employee Retention Credit

The U.S. Treasury and IRS launched the Employee Retention Credit on March 31, 2020. Eligible entities can receive a refundable payroll tax credit for 50% of up to $10,000 in qualified wages for retaining idled workers on their payrolls during the COVID pandemic.

Qualified wages are based on the average number of a business’s employees in 2019. If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter. For eligible employers with under 100 employees, all employee wages qualify for the credit. The credit is capped at the first $10,000 of compensation, including health benefits. The provision is effective for wages paid or incurred from March 12, 2020 to January 1, 2021.

Delay Payment of Employer Payroll Taxes

All employers and self-employed individuals may defer the 6.2% employer share of Social Security taxes for two years. Fifty percent of the deferred payroll taxes are due on December 31, 2021, and the remaining amounts are due on December 31, 2022.

Additional Tax Changes

• Business Expense Deduction Changes: Business Expense Deduction Limits are increased from 30% to 50% for 2019 and 2020. Additional rules apply to partnerships.
• Retail Tax: Retailers, restaurateurs and hotels will be able to immediately deduct qualified property improvements and amend previous year filings.
• Relaxes Net Operating Loss Limits: Businesses will be allowed to carry net operating losses arising in the 2018, 2019, and 2020 tax years back five years. The taxable income limit is temporarily removed to allow a NOL to fully offset income for those years. Additional rules apply for life insurance companies.
• Alternative Minimum Tax: Corporations are able to accelerate their ability to recover the AMT credits from previous years and claim any resulting refund.

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