The National Association of Broadcasters’ (NAB) advocacy has ensured that COVID-19 pandemic relief passed by Congress includes support for local broadcast stations, including expansion of Paycheck Protection Program. As tax time rolls around for many employers, it’s a good time to see how the various coronavirus relief packages may help your business. NAB’s CARES Act user guide provides more information about these provisions. In addition to the employee retention tax credit detailed below, other corporate tax changes such as modifications for payroll taxes, net operating losses and limitations on business interests are outlined on that site.
The employee retention tax credit (ERTC) was included in the original CARES Act legislation but updated with even more help for businesses in last December’s package. Those terms applied in a forward-looking manner, effective on January 1, 2021; for 2020, the original terms remained in place.
Originally, an employer had to have demonstrated a loss of 50% or more in gross receipts, comparing any quarter of the covered period to the same quarter of the prior year. December’s updates changed that to only require a 20% loss, so if an employer can show that loss, or if their operations were fully or partially suspended due to a COVID-19-related shutdown order, they can claim a refundable payroll tax credit. That credit is for 70% of wages (increased from the initial 50% allowance), up to the first $10,000 of compensation, including health benefits, per employee, per quarter (originally annually), effective until the end of the second quarter of this year, for a potential total of $19,000 over the year and a half span. Put more simply, an employer may be able to take a credit for as much as $5,000 per employee from March 12-December 31, 2020 and $7,000 for each of the first two quarters of 2021.
For eligible employers deemed small businesses, 500 or fewer full-time employees (increased from the previous 100 FTE threshold), all employee wages qualify for the credit whether the employer is open for business or subject to a shut-down order. For employers with greater than 500 full-time employees, qualified wages are those wages paid to employees when they are not providing services due to COVID-19 related circumstances.
Finally, while an employer may not claim this credit for wages paid through a forgivable loan under the Paycheck Protection Program (PPP), even those who took a PPP loan are eligible for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.
You can find more information on the employee retention tax credit below: