The Families First Corona Response Act (FFCRA) and Coronavirus Aid, Relief and Economic Security (CARES) Act created three employer benefits claimed through payroll taxes, a 100% refundable credit against the cost of benefits paid under the FFCRA (FFCRA Credits), the Employee Retention Credit, and Employer Payroll Tax Deferral. The following is a list of FAQs and observations on these three provisions.
Who is eligible to claim the credit/benefit?
FFCRA Credits
Any business paying employees under the sick leave or expanded FMLA coverage provided by the FFCRA. Generally, all employers with under 500 employees are covered by the FFCRA. See the following Department of Labor FAQ for specific questions on eligibility and benefits. Department of Labor FAQ
Employee Retention Credit
Those that carry on a trade or business during the 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.
Employer Payroll Tax Deferral
Every business until they are approved for loan forgiveness under the CARES Act.
Can I take a Payroll Protection Program (PPP) Loan and receive the benefit?
FFCRA Credits
Yes. However, the benefits paid under the FFCRA are not included in payroll costs for the calculation of the loan amount or amount forgiven.
Employee Retention Credit
No. Employers receiving a PPP loan are ineligible for the credit.
Employer Payroll Tax Deferral
Yes. Businesses with loan amounts forgiven under the CARES Act are ineligible. According to the following IRS FAQ, all employers, including those applying for PPP loans, claiming FFCRA credits, and claiming the CARES Act employee retention credit, can defer the payment of the employer’s share of social security tax until they receive a decision from their lender that any portion of its PPP loan is forgiven. IRS Deferral of Employment Tax Deposit FAQ
When can an employer receive the credit/benefit?
FFCRA Credits
Employers can claim the 100% tax credit against employment taxes for benefits earned starting April 1st. The credit will be claimed on Form 941, Employer’s Quarterly Federal Tax Return. Employers may receive an advanced credit by reducing their otherwise required payroll deposits. If the total credit exceeds their payroll deposit they can file Form 7200 to claim a refund. Below is a link to the IRS FAQ on the FFCRA benefits and tax credits, including examples of how to claim the credit. IRS FFCRA Credits FAQ
Employee Retention Credit
The employee retention tax credit applies to wages paid after March 12, 2020, and before January 1, 2021. According to the IRS, 1st quarter credits earned for pay between March 13th and March 31st will be claimed on a second quarter Form 941. The credit will not be claimed on the first quarter payroll return. Employers may receive an advanced credit by reducing their otherwise required payroll deposits. If the total credit exceeds their payroll deposit they can file Form 7200 to claim a refund. Below is a link to the IRS FAQ on the employee retention credit, including examples of how to claim the credit.
IRS Employee Retention Credit FAQ
Employer Payroll Tax Deferral
The deferral period starts on March 27, 2020, and ends December 31, 2020. Employers may defer payment of their share of social security taxes during this period. Employers receiving a PPP Loan will no longer be allowed to defer payment once they receive a decision from their lender that their loan is forgiven.
