IRS publishes Employee Retention Credit FAQ

Washington — The Internal Revenue Service has published an FAQ on the Employee Retention Credit in regards to the Coronavirus Aid, Relief, and Economic Security Act.

This CARES Act credit was designed to encourage employers to keep employees on their payroll, “despite experiencing economic hardship related to COVID-19, with an employee retention tax credit,” the IRS said.

According to the FAQ, the credit is “a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees.” The IRS also said that the credit applies to “qualified wages paid after March 12, and before Jan. 1, 2021."

The FAQ also explains that eligible employers for the credit are businesses in operation in 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.”

The IRS noted that governmental employers and self-employed individuals are not eligible for the credit.

Read the FAQ in full at IRS.gov.