The Payroll Tax Credit is also known as the Employee Retention Credit, which was a portion of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and intends to help businesses remain solvent during the COVID-19 pandemic. The Employee Retention Credit is considered a fully refundable tax credit for employers that is 50 percent of any qualified wages that eligible employers pay their employees.
The Employee Retention Credit will apply to qualified wages that are paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to every employee for all calendar quarters will be $10,000, meaning the maximum credit for eligible employers for qualified wages paid to any employee is $5,000.
In terms of the Employee Retention Credit, eligible employers are considered employers that carry on a business during 2020 that fully or partially suspended operation during a calendar quarter in 2020 because of orders from an appropriate governmental authority limiting commerce, travel, or group meetings because of COVID-19, or saw some significant decline in gross receipts during a calendar quarter. Any significant decline in gross receipts will begin with the first calendar quarter in 2020 in which an employer’s gross receipts ended up being less than 50 percent of the gross receipts for the same calendar quarter in 2019.
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