The Coronavirus Aid, Relief, and Economic Security (CARES) Act introduces a refundable employee retention credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.
Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer’s employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS. For each employee, wages (including certain health plan costs) up to $10,000 can be counted to determine the amount of the 50 percent credit.
Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either: (1) the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or (2) a significant decline in gross receipts. See the IRS website for details.