The Paycheck Protection Program (PPP) made the biggest splash in the CARES Act bailout for businesses, but don't overlook the Employee Retention Credit.
Employers whose businesses were impacted by the pandemic can claim a refundable tax credit of 50% of up to $10,000 in wages paid between March 13 and the end of this year.
That's true even if you've gotten PPP money, as long as you repaid the loan by May 14.
And you don't even have to wait until you file quarterly taxes. The IRS says, "Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer's employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS."
Operations suspended? Income down from last year?
In its FAQ about the retention credit, the IRS says employers are eligible for the tax credit under if they meet either of these two conditions:
- They had to suspend operation fully or partially 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.
- They experienced a significant decline in gross receipts during the calendar quarter. That means gross receipts are below 50% of the comparable quarter in 2019. Once the employer's gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
Widely available, unless you're government
The IRS says the credit is available to all employers regardless of size, including tax-exempt organizations. The only two exceptions are "state and local governments and their instrumentalities" and "small businesses who take small business loans."
Here's a detailed article from Paychex (NASDAQ: PAYX) that reviews the credit. And, of course, check with your tax advisor for clarity, including on the "small business loans" reference, but the credit would seem to be available to cover many real estate-related ventures as well as tenants operating hard-hit businesses.
Unlike PPP, it's easy as 1-2-3
PPP loans, meanwhile, involved applying through a participating bank or credit union, many of which turned away potential borrowers, especially non-customers or members, simply because of their capacity to handle the traffic. Plus, the billions quickly ran out.
In the case of the Employee Retention Credit, you or your designated agent simply has to file Form 7200.