COVID-19 Relief Includes New Tax Credits & Tax Deferral for Employers

In response to the COVID-19 pandemic, Congress passed a series of broad relief packages including Paycheck Protection Program (“PPP”) loans and new tax credits & tax deferral, which collectively provide a wide range of financial assistance options for employers affected by the novel Coronavirus. Professional Employer Organizations (“PEOs”) have a critical role to play in helping their clients navigate and quickly take advantage of the new credits and tax deferral. Available relief for employers includes the following:

FFCRA Emergency Sick Leave Payroll Tax Credit

• Employer has fewer than 500 employees per entity
• Pays employees who request up to 80 hours of leave for COVID-19 related self-care or care of others
• Credit limited to lesser of 100% or two-thirds of employee’s regular pay or daily rate of $511/$200 depending on reason for leave

FFCRA Emergency Family Medical Leave Payroll Tax Credit

• Employer has fewer than 500 employees, including affiliates as defined by FMLA
• Pays employees who request up to 12 weeks of leave to care for a child under age 18, whose school or care provider is unavailable due to COVID-19
• Credit limited to the lesser of two-thirds of employee’s regular pay or daily rate of $200 for 10 weeks

CARES Payroll Tax Deferral

• Employer of any size can defer its payment of employer Social Security (6.2%), beginning March 27, 2020 and ending December 31, 2020
• 50.0% must be paid by December 31, 2021, with remainder due by December 31, 2022

CARES Employee Retention Payroll Tax Credit

• An eligible employer is one that has had

• Operations fully or partially suspended due to COVID-19 related government order that limits commerce, travel or group meetings; or
• Gross receipts for the 2020 quarter decline more than 50.0% when compared to the same 2019 quarter (eligibility continues through the 2020 quarter in which gross receipts are greater than 80.0% of gross receipts in the same 2019 quarter)

• For employers with greater than 100 employees, tax credit is 50.0% of wages up to $10,000 paid to employees who are NOT performing service (max credit of $5,000 per employee)
• For employers with 100 or fewer employees, tax credit is 50.0% of wages up to $10,000 paid to any and all employees (max credit of $5,000 per employee)
• Employer is determined on a controlled group/affiliated service group basis
• Employer is not eligible for the tax credit if it receives an SBA loan under the Paycheck Protection Program

Except these tax credits and deferrals, PEOs can help their clients with PPP loans through the CARES Act, payroll administration, staff on-boarding and terminations process during COVID-19. In addition, small businesses can benefit from PEOs with full-service HR divisions, which provide a full team of experts who eagerly await legislation updates.

SOURCE(S):

• https://www.napeo.org/peo-resources/publications-products/peo-insider/issue/may-2020/covid-19-relief-includes-new-tax-credits-tax-deferral-for-employers
• https://www.bdo.com/insights/tax/federal-tax/covid-19-payroll-tax-relief-credits-and-deferral​