Businesses all over the country have been affected by the COVID-19 pandemic. Many are facing extreme financial pressure. Fortunately, there are tax breaks that can provide businesses with much needed relief.
The Employee Retention Credit
This credit is a fully refundable tax credit for employers equal to 50% of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.
Who is an Eligible Employer?
Eligible Employers for the purposes of the Employee Retention Credit are employers
that carry on a trade or business during calendar year 2020, including tax-exempt
organizations, that either:
• Fully or partially suspend operation during any calendar quarter in 2020 due
to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
• Experience a significant decline in gross receipts during the calendar quarter.
Hold Off on Payroll Taxes
Payroll taxes are typically paid on a regular schedule throughout the year. The last quarterly deposit for small businesses was July 15. But under the CARES Act, a business can defer the 6.2% Social Security tax component of federal payroll taxes for the period between March 27, 2020 and December 31, 2020. Businesses can then pay 50% of the deferred Social Security tax by December 31, 2021 and the remaining 50% Social Security tax by December 31, 2022.
Buying work equipment during economic uncertainty sounds counterintuitive, but under Section 179 you can currently educt up to $1.04 million of eligible costs in 2020, with a phase-out threshold of $2.59 million. You can also claim 100% first-year bonus depreciation for the cost of qualified property. This break covers both new and used
If you’re unsure if your business qualifies for these tax credits, contact the professionals at KRD at 847-240-1040.