Tax credits to help with employee-related COVID-19 costs may end soon

Employers have at least until the end of September to claim payroll tax credits for coronavirus-related costs and retaining employees, but whether this relief will extend into the fourth quarter is unclear.

Employers can take advantage of two programs regarding payroll tax credits at least through September: Families First Coronavirus Response Act (FFCRA) and Employee Retention Tax Credits (ERTC).

But FFCRA is ending Sept. 30, and the pending $1.2 trillion federal infrastructure bill includes language that would also end the ERTC program by the end of the month.

• Because of the uncertainty of whether ERTC will remain in effect until the end of the year, we recommend businesses make all required payroll deposits in the 4^th If ERTC extends through the end of 2021, employers will be able to request a refund on their 4^th Quarter 941 form.

A quick refresher about both payroll tax credit programs

FFCRA: FFCRA tax credits apply to people who had to stay home and could not work for COVID-related reasons, including being sick or in quarantine themselves; having to care for another; taking time off to care for children.  Among the pandemic-related criteria qualifying for the payroll tax credit is time off to obtain COVID-19 immunization and recover from any illness or disability caused by the vaccine, such as missing a day or so because of side effects.  Businesses with fewer than 500 employees can claim FFCRA until Sept. 30, 2021.

ERTC: Businesses with fewer than 500 employees and meet certain revenue reduction requirements or had to fully or partially shut down due to government order may be eligible to claim ERTC, allowing them to receive tax credits up to $7,000 per employee, per quarter, during 2021.  Businesses may also be eligible for ERTC if they meet either of the following definitions:

• Businesses established after Feb. 15, 2020, with gross receipts of up to $1 million, are eligible for ERTC. There is a $50,000 ERTC cap per quarter for these “startup’’ businesses.
• “Severely financially distressed employers,” defined as a business that saw a 90 percent or more reduction in gross receipts as compared to the same quarter in 2019, can treat all wages as ERTC-qualified wages. Large employers' limitation on wages paid to employees not providing services does not apply to severely financially distressed employers.

For more information about these programs, please click here

Looking ahead

With the continued uncertainty surrounding the COVID-19 pandemic and its continued impact on the economy, we may see the federal government provide additional relief to businesses.

The Boyer & Ritter team is tracking the latest development and is ready to help businesses navigate federal coronavirus relief programs' complex regulations and requirements.

Benjamin R. Bostic, CPA, is a director at Boyer & Ritter with experience providing tax and accounting services for closely-held businesses, individuals, and not-for-profit organizations. Reach Ben at 717-264-7456 or bbostic@cpabr.com