Post from Chamber Member Teresa M. Ray

The huge topic these days for business owners is what am I obligated to pay my employees?  The answer seems to be ever-changing by the day.  I was told today that the “final regulations” will be out sometime in April.  Employers are calling our office daily asking if it would it be better to have an employee work or file for unemployment?  What are my obligations regarding paid sick leave?  At our office we’re asking our resources such as CPA’s, HR professionals and employment law firms to help us answer these questions.  We’ve posted their responses on our Facebook page,  https://www.facebook.com/ThePayrollDepartment, and I’ll include a really good link here: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions

Another question is regarding a payroll tax extension.  The IRS granted an extension for income tax only and NOT employment taxes that businesses must pay.  That means that small businesses still must file their 941 forms, which employers use to report taxes withheld from worker’s paychecks and to pay their portion of Social Security and Medicare.  Employers still must file employment tax returns on time and make employments tax deposits on time. 

While trying to understand and wait for clarification from the government on these issues, please watch our Facebook page for information coming from several different sources.  Here’s some recent information from a local CPA regarding Employee Retention Credit:

For wages paid after March 12, 2020, and before January 1, 2021, eligible employers would be allowed a new refundable payroll tax credit equal to 50 percent of the qualified wages paid. The total eligible wages per employee are $10,000, resulting in a maximum credit of $5,000 per employee. To qualify for the credit, an employer must meet all of the following criteria:

1. The employer must have carried on a trade or business during calendar-year 2020.
2. The operation of that trade or business is either:
   • Fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel or group meetings due to COVID-19; or
   • Receiving gross receipts, for at least one calendar quarter, that are less than 50 percent of the gross receipts received during the same calendar quarter(s) in the prior year. This period of significant decline in gross receipts is recognized until the gross receipts for a calendar quarter are greater than 80 percent of gross receipts for the same calendar quarter in the prior year.

For employers with less than 100 employees, qualified wages include any wages paid during the time business was closed or during which gross receipts declined more than 50% as compared to the same quarter of the previous year.  For employers with more than 100 employees, qualified wages only include those that are paid during the time business was closed.

Employers receiving small business interruption loans (see below) are not eligible for the employee retention credit.

In summary, your business will need to have either been shut down or suffered a substantial loss of revenue yet continued to pay employees during this period to qualify for this credit.  You will need to be able to provide adequate financial records to support the loss in revenue, as well as the wages paid, by quarter.  Without these records, by quarter for 2019 and 2020, you almost certainly won’t be able to take this credit.  There are bound to be other restrictions in this provision, too (i.e. whether or not S Corp owner’s payroll qualifies).  I’ll provide more details as they become available. 

This credit will be claimed on your 2020 business tax return.  It won’t help with liquidity and cash flow immediately, though. 

Teresa Ray

701 North Green St. Brownsburg, IN 46112

(317) 852-2568