Checkmate's Employee Retention Tax Credit Service
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, was designed to encourage Eligible Employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19, with an employee retention tax credit (ERTC).
In late December 2020, legislation was passed, making the 2020 ERTC available retroactively to all employers who obtained a PPP loan in 2020.
The ERTC is a fully refundable payroll tax credit for employers equal to 50 percent 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 those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, that either:
- Fully or partially suspends 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
- Experiences a significant decline in gross receipts during the calendar quarter.
What is a Significant Decline in Gross Receipts?
A significant decline in gross receipts begins with the first quarter in which an employer’s gross receipts for a calendar quarter in 2020 are less than 50 percent of its gross receipts for the same calendar quarter in 2019. The significant decline in gross receipts ends with the first calendar quarter that follows the first calendar quarter for which the employer’s 2020 gross receipts for the quarter are greater than 80 percent of its gross receipts for the same calendar quarter during 2019.
When Does ERTC End with Full/Partial Suspension of Operations?
For employers who are eligible for the ERTC due to a full or partial suspension of operations, the ERTC is available for qualified wages paid from the date on which operations are first affected by the suspension through the last day on which your business was affected by the full or partial suspension of operations.
What are Qualified Wages?
Qualified wages are wages and compensation paid by an Eligible Employer to employees after March 12, 2020, and before January 1, 2021. Qualified wages include the Eligible Employer’s qualified health plan expenses that are properly allocable to the wages.
The definition of qualified wages depends, in part, on the average number of full-time employees employed by the Eligible Employer during 2019.
If the Eligible Employer averaged more than 100 full-time employees in 2019, qualified wages are the wages paid to an employee for time that the employee is not providing services due to either (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts. For these employers, qualified wages taken into account for an employee may not exceed what the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship.
If the Eligible Employer averaged 100 or fewer full-time employees in 2019, qualified wages are the wages paid to any employee during any period of economic hardship described in (1) and (2) above.
CARES Act Compliance – 2020 Employee Retention Tax Credit Service
Checkmate’s Service includes:
- Guidance on the proper method of calculating the ERTC that you are entitled to.
- Creation of certain payroll reports within CheckmateHCM to assist with the calculation of the ERTC that you are entitled to.
- Processing of corrected 2020 941 payroll tax returns to obtain the Employee Retention Tax Credit.
- Review/Monitoring of the Processing of Corrected Returns with IRS.
- Review and monitoring of per pay period and YTD Employee Retention Tax Credit amounts, to ensure that annual per employee tax credit limits are adhered to and that tax credits are only calculated on eligible wages.
In order to utilize Checkmate’s Employee Retention Tax Credit Service, please complete the web form to the right.