The Internal Revenue Service reminded employers affected by COVID-19 on Thursday of three important new tax credits available to them — employee retention as well as paid sick and family leave.
Employee Retention Tax Credit
The employee retention credit, a refundable tax credit, is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
The credit is available to all employers regardless of size, including tax-exempt organizations. However, the credit is not available to state and local governments and their instrumentalities and small businesses who take small-business loans.
Qualifying employers include: businesses that are fully or partially suspended by government order due to COVID-19 during the calendar quarter as well as those with gross receipts that are below 50% of the comparable quarter in 2019.
Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
Employers will calculate these measures each calendar quarter.
Paid Sick Leave Tax Credit
The paid sick leave credit is designed to allow business to get a credit for an employee who is unable to work (including telework) because of coronavirus quarantine or self-quarantine or has COVID-19 symptoms and is seeking a medical diagnosis.
Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay up to $511 per day and $5,110 in total.
The employer can also receive the credit for employees who are unable to work due to caring for someone with COVID-19 or caring for a child because the child’s school or place of care is closed, or the paid child care provider is unavailable due to the coronavirus.