Issue Number: COVID Tax Tip 2020-67
Who qualifies for which new employer tax credit?
Many businesses affected by COVID-19 qualify for tax relief though credits or deferrals.
Here’s a breakdown of which employers qualify for these new tax credits and the deferral of employment tax deposits and payments through Dec. 31, 2020.
Credits for paid sick and family leave
Businesses and tax-exempt organizations that have less than 500 employees and provide one or both types of leave can claim the refundable credits. Self-employed people can also claim similar credits. Some public employers must provide paid sick leave and family leave but, aren’t eligible for the credits.
Guidance from the Department of Labor has details on these leave requirements.
Employee Retention Credit
The Employee Retention Credit is available to employers of any size, including tax-exempt organizations. It also may be available to tribes, if they operate a trade or business. Self-employed people can’t receive the credit for their own earnings but may be able to claim the credit for wages paid to their employees. Federal agencies, state and local governments and businesses that receive Paycheck Protection Program loans don’t qualify.
Eligible employers are defined as those who operate a trade or business and experienced one of these:
- Fully or partially suspended operations because of a government order due to COVID-19
- A significant decline in gross receipts in a calendar quarter when compared to 2019
Deferral of employment tax deposits and payments
Employers may defer the deposit and payment of their share of Social Security tax and certain Railroad Retirement taxes. However, employers who receive a Paycheck Protection Program loan can’t defer their share of Social Security tax due after the lender forgives their loan.
More information:
COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses
COVID-19-Related Tax Credits: Determining the Amount of the Tax Credit for Qualified Sick Leave Wages FAQs
COVID-19-Related Tax Credits: Determining the Amount of the Tax Credit for Qualified Family Leave Wages FAQs
FAQs: Employee Retention Credit under the CARES Act
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