CARES Act Alternative Financial Relief For Employers If They Do Not Obtain An SBA Payroll Protection Program Loan
ALTERNATIVE FINANCIAL RELIEF FOR EMPLOYERS IF THEY DO NOT OBTAIN A PAYROLL PROTECTION PROGRAM LOAN
The following two programs, payroll tax deferral and payroll retention credit, only apply to employers who do not obtain a forgivable SBA Payroll Protection Loan. Employers should consult with counsel and their financial advisors in making a decision about which programs to pursue.
PAYROLL TAX DEFERRAL FOR ALL EMPLOYERS
Who is eligible?
Any employer (except an employer that received forgiveness of part of a PPP Loan).
What is deferred?
The 6.2% payroll tax owed during 2020.
Until when is it deferred?
50% must be paid by December 31, 2021, and 50% by December 31, 2022.
PAYROLL RETENTION CREDIT TO ENCOURAGE EMPLOYERS TO KEEP EMPLOYEES
Who is eligible?
Any employer (except an employer that obtained a PPP Loan), if during the applicable quarter,
a)the business was fully or partially suspended due to government orders limiting commerce, travel, or group meetings due to the Coronavirus pandemic, or
b)the business suffered a reduction in quarterly gross receipts of more than 50% compared to the same quarter in 2019. The business will continue to be eligible each quarter until the business has a quarter where gross receipts exceed 80% of what they were in the same quarter the last year.
What is the amount of the payroll tax credit?
The amount depends on the size of the employer.
For employers with more than 100 employees in 2019:
Up to $5,000 per employee per quarter (50% of the wages paid in the quarter, up to $10,000), for the wages paid to a furloughed employee even though the employee is not providing any services to the employer due to the business slowdown.
For employers with 100 or fewer employees in 2019:
Up to $5,000 per employee per quarter (50% of the wages paid in the quarter, up to $10,000), for the wages paid to any employees, including those that are still working and paid furloughed employees.
How does an employer receive the payroll tax credit?
The employer can deduct the amount of the tax credit from the payroll taxes it is going to pay for all employees for the quarter. If the amount of the credit exceeds the payroll taxes for all employees for the quarter, then the employer will be entitled to a refund for such excess amount.