Employee Retention Credit

As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted on 3/27/2020, the Employee Retention Credit is an incentive from the government encouraging employers to keep employees on their payroll. The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages that Eligible Employers pay their employees. This applies to qualified wages paid from 3/13/2020 through 12/31/2020.

Determining Eligibility:

Per the IRS Guidelines, "eligible employers that are entitled to claim the Employee Retention Credit are private-sector businesses and tax-exempt organizations that carry on a trade or business during calendar year 2020 and either:

• Have operations that were fully or partially suspended during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
• Experienced a significant decline in gross receipts during the calendar quarter."

For more information regarding employer eligibility and FAQ, please visit the IRS site here.

Qualified Wages:

"The definition of qualified wages depends on how many employees an eligible employer has.

If an employer averaged more than 100 full-time employees during 2019, qualified wages are generally those wages, including certain health care costs, (up to $10,000 per employee) paid to employees that are not providing services because operations were suspended or due to the decline in gross receipts. These employers can only count wages up to the amount that the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship.

If an employer averaged 100 or fewer full-time employees during 2019, qualified wages are those wages, including health care costs, (up to $10,000 per employee) paid to any employee during the period operations were suspended or the period of the decline in gross receipts, regardless of whether or not its employees are providing services."

Impact of other credit and relief provisions:

"An eligible employer's ability to claim the Employee Retention Credit is impacted by other credit and relief provisions as follows:

• If an employer receives a Small Business Interruption Loan under the Paycheck Protection Program, authorized under the CARES Act, then the employer is not eligible for the Employee Retention Credit.
• Wages for this credit do not include wages for which the employer received a tax credit for paid sick and family leave under the Families First Coronavirus Response Act.
• Wages counted for this credit can't be counted for the credit for paid family and medical leave under section 45S of the Internal Revenue Code.
• Employees are not counted for this credit if the employer is allowed a Work Opportunity Tax Credit under section 51 of the Internal Revenue Code for the employee."

For more information regarding employer eligibility and FAQ, please visit the IRS site here.

Setting Up the Employee Retention Credit within CertiPay Online:

1. Go to Company in the top blue ribbon
2. Choose Retention Credit  from the left navigation panel
3. Select Manage
4. Select eligible employees by clicking the white box to the left of each name (or select the white box at the top to select all employees):
5. Click Set Date Range at the bottom of the employee list
6. Enter the date the begin and end dates for qualifying wages. If the employee still qualifies, the box can be left blank:
7. Save

Qualified wages will then be displayed for each employee per the date(s) entered and will be updated as payroll is processed through the application. 

Sources: 

https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-determining-which-employers-are-eligible-to-claim-the-employee-retention-credit-faqs

https://www.irs.gov/coronavirus/employee-retention-credit