Congress has tried in many ways to help employers through the COVID-19 pandemic. The headline was the Payroll Protection Program, which was passed as part of the CARES Act last year. But, the Taxpayer Disaster Relief and Relief Act of 2020, enacted on December 27, 2020, made some changes to the employee retention tax credits previously available under the CARES Act, including an extension of the Employee Retention Credit (ERC) through June 30, 2021.
With the new changes, employers, including estate planning attorneys, may be able to claim refundable A credit against the employer’s share of Social Security tax. This credit can be up to a maximum of $7,000 per employee each quarter, for a total of $14,000 in 2021. Under current legislation, the credit is only applicable until June 30, 2021. The credit is 70% of eligible wages up to $10,000 per employee Quarterly. The balance is refundable. In other words, even if you don’t owe that much tax, you can still get that amount back.
Employers are eligible if they run a business between January 1 through June 30, 2021 and have experienced either:
- Total or partial suspension of the operation of their trade or business during this period due to government orders limiting trade, travel or group meetings due to COVID-19, or
- Decline in Gross Receipts in a calendar quarter in 2021 where Gross Receipts in that calendar quarter are less than 80% of Gross Receipts in the same calendar quarter in 2019 (qualified based on a decline in Gross Receipts in 2020). Receipts must be less than 50%).
If your business did not exist in 2019, you would use the corresponding quarter in 2020 for the comparison.
According to the IRS, “For an employer with an average of 500 or fewer full-time employees in 2019, eligible wages are generally those wages paid to all employees during the period in which operations were suspended in whole or in part or during the quarter in which the employer had a decline in gross receipts regardless of whether employees provide services or not.”
Furthermore, the law now allows employers who have received PPP loans to claim equity and reconciliation status for eligible wages that are not treated as payroll costs to obtain PPP loan forgiveness. In other words, you can count them as long as you’re not doing double dips.
You can get credit before you file your tax return by reducing your business tax deposits. Small employers (those with less than 500 full-time employees in 2019) may request credit prepayment (subject to certain restrictions) on Form 7200, Employer Credits Due for Covid-19, after deposits are reduced. Larger employers do not qualify for this advancement.
If you would like more information, see this announcement from the IRS.
Furthermore, the IRS has extended the deadline for submission of files An individual Income taxes until May 17, 2021. See this announcement from the IRS.
Stephen C. Hartnett, JD, LLM
American Academy of Estate Planning Lawyers, Inc.
9444 Balboa Street, Suite 300
San Diego, CA 92123
Phone: (858) 453-2128