Employee Retention Tax Credit Under the CARES Act

Apr 1, 2020

By Krista Nelson Slosburg | Related Practice: Employment

The CARES Act contains a separate incentive for employee retention that is different from the Paycheck Protection Program you may have read about. The Employee Retention Tax Credit, discussed in detail here, permits employers who do not participate in the Paycheck Protection Program to take a credit against payroll taxes owed for qualified wages.

Person looking in envelope containing paycheck with keyboard in background

Employers are eligible if:

(a) Operations are fully or partially suspended due to a COVID-19 shutdown order; or

(b) If gross receipts for the calendar quarter declined more than 50% when compared to the same quarter in 2019.

The available tax credit is for 50% of qualified wages for each employee not to exceed $10,000 per employee. Payroll expenses for paid sick leave or extended Family and Medical Leave Act (FMLA) under the Families First Coronavirus Response Act (FFCRA) are exempt from the tax credit, since the full amount of those wages is already reimbursable through separate tax credits.

If you have questions about tax credits applicable to your situation, contact a member of our Employment Group.