Financial Foothold

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ELIGIBLE EMPLOYERS
POTENTIAL BENEFITS
RESTRICTIONS ON OVERLAPPING BENEFITS
Available to employers:
(1) that were carrying on a trade or business during calendar year 2020, and
(2) with respect to any calendar quarter:
o had its operations fully or partially suspended under government orders due to COVID-19, or
o had a decline of at least 50% in gross receipts as compared to the same calendar quarter in the prior year

Special rules to be provided for employers that were not in operation for all of 2020

Tax-exempt employers described in Code section 501(c) are treated as having met the conditions for eligibility (i.e., they are deemed to satisfy the trade or business requirement and the full or partial suspension requirement)
Employer generally entitled to a tax credit equal to 50% of “qualified wages” with respect to each employee for the quarter

Credit can be taken immediately against the employer portion of Social Security taxes (Code section 3111(a)) that are due (and potentially against other federal employment tax obligations that the IRS specifies). If employer is not able to claim entire credit against applicable employment taxes due, any excess credit is treated as an overpayment to be refunded promptly by the IRS.

“Qualified wages” are calculated as follows:
• For employers with 100 or fewer fulltime employees: all employee wages paid
• For employers with more than 100 full time employees: wages paid to employees not performing services due to COVID-19-related circumstances (either suspension of operations or reduction in gross receipts)
• Maximum total wages considered for any employee are capped at $10,000 (i.e., max credit is $5,000 per employee)
• Credit calculation includes employer’s “properly allocable” qualified health plan expenses with respect to the employee
• Wages considered under paid sick/family leave (FFCRA) (i.e., those that receive a separate 100% credit) are excluded
Full-time employee count is determined in same manner as the Affordable Care Act’s shared responsibility provisions (Code section 4980H).
IRS authorized to provide guidance to clients and PEOs on documentation necessary to substantiate the eligible employer status of clients
Credit not available if eligible employer receives a covered loan under SBA’s new Paycheck Protection program (described to the left)

Also, no double benefit with:
o Work opportunity credit (Code section 51)
o Employer credit for paid family and medical leave added in 2017 tax reform legislation (Code sec. 45S)

ELIGIBLE EMPLOYERS
POTENTIAL BENEFITS
RESTRICTIONS ON OVERLAPPING BENEFITS
All employers are eligible (subject to the exception described in the last row below)
Employers may defer employer share of Social Security tax deposits (Code section 3111(a)) due for the period beginning 3/27/20 through 12/31/2020.

Payment schedule for deferred taxes:
o 50% due by 12/31/2021
o 50% due by 12/31/2022

PEO client employers would assume sole liability for payment of any deferred taxes when the client directs the PEO to defer tax payment with respect to wages paid by the PEO under this deferral option. IRS expected to issue guidance on rules for the administration and enforcement of these provisions

Comparable tax deferral provisions are provided to partners with respect to ½ of SECA taxes for the period beginning 3/27/20 through 12/31/2020
Social Security tax deferral is not available if taxpayer has had indebtedness forgiven under new SBA loan forgiveness provisions (described to the left)

However, it is possible that the IRS will determine that partners in an LLP may be eligible for SECA tax deferral even if the LLP obtains an SBA Paycheck Protection loan

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