The IRS has released an extensive FAQ clarifying many early questions about when the employee retention tax credit can be claimed. The tax credit is designed to support eligible employers whose businesses are disrupted due to COVID-19 and was included in the CARES Act that was recently enacted into law.
In general, eligible employers are allowed a credit equal to 50% of up to $10,000 in qualified wages with respect to each employee.
To claim this credit, the business must experience one of these two
- The operation of the trade or business is fully or partially suspended during the appropriate calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19; or
- The trade or business experiences a significant decline in gross receipts, with a 50% decline in gross receipts when compared to the same quarter in the prior year. Businesses remain eligible until their gross receipts recover to 80% when compared to the same quarter in the previous year.
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Source: Homes and Lifestyle