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Home Affordable Care Act New Senate Bill Seeks to Enhance the Employee Retention Credit Under the CARES Act

New Senate Bill Seeks to Enhance the Employee Retention Credit Under the CARES Act

2 minute read
by Robert Sheen

2 minute read:

The Senate recently introduced new legislation to further assist in the continuing COVID-19 pandemic, including the American Workers, Families and Employer Assistance Act. Under this Senate Bill, the existing Employee Retention Credit (ERC) under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) would be enhanced.

Under the CARES Act, an employer that was carrying on a trade or business in the calendar year 2020 is eligible if there was a COVID-19 Economic Hardship, which means either (1) the employer’s operation was fully or partially suspended due to a government order limiting commerce due to the COVID-19 order or (2) the employer experienced a decline of 50% or more in gross receipts in any calendar quarter starting on January 1, 2020, except that once the employer’s gross receipts exceed 80% of a comparable quarter in 2019,the employer no longer qualifies after the end of that quarter.

Under the CARES Act, an employer may receive an ERC against certain employment-related taxes in 2020 equal to 50% of the Qualified Wages (including health care expenses allocable to the wages) with respect to each employee. Qualified Wages must be in the timeframe of March 12, 2020 and December 1, 2020. In calculating Qualified Wages, (a) if the employer had more than 100 full-time employees (at least 30 hours per week, per Internal Revenue Code Section 4980H) in 2019, Qualified Wages mean wages paid to an employee for time that the employee was not working due to COVID-19 Economic Hardship and (b) if the employer had no more than 100 full-time employees in 2019, Qualified Wages mean all wages paid to an employee during the COVID-19 Economic Hardship, whether worked or not. The maximum amount of Qualified Wages is $10,000, translating to a maximum ERC of $5,000.

The new Senate Bill increases the employer size cutoff from 100 to 500 employees to access the ERC regardless of whether the wages were paid for work performed or not. In other words, even if the employees were paid for working, the ERC is available for employers with no more than 500 employees.

The new Senate Bill loosens the gross receipts calculation so that an employer is eligible if gross receipts are less than 75% of that in the same calendar quarter in the prior year. For an employer who was not eligible for a calendar quarter ending on June 30, 2020, additional flexibility is available for the use of the prior quarter instead of the calendar quarter for the prior year.

The new Senate Bill seeks to coordinate with the Paycheck Protection Program (PPP), which under the CARES Act blanketly prohibits the receipt of both aPPP,loan and the ERC. Qualified Wages for ERC are available to the extent not subject to PPP loan forgiveness. The Senate Bill also prohibits double-dipping with certain other tax credits.

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New Senate Bill Seeks to Enhance the Employee Retention Credit Under the CARES Act
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New Senate Bill Seeks to Enhance the Employee Retention Credit Under the CARES Act
Description
New Senate Bill seeks to increase the amount and allow easier access to the Employee Retention Credit Under the CARES Act
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The ACA Times
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