As has been noted on several occasions since the COVID-19 crisis began, the legislative and economic environment is fluid, with constant changes commonplace and updates being announced regularly.

As such, we are clarifying some recently released points that expand the details previously published in our original article on the Employee Retention Credit.

What you need to know: As of now, Paycheck Protection Program (“PPP”) borrowers who were concerned with the requirements of good-faith certification may have repaid their PPP loans before May 18, 2020 deadline.

An employer with a PPP loan is not eligible for the employee retention credit provided in the CARES Act. However, the Small Business Administration has stated that an employer who applied for a PPP loan, received payment and repays the loan by the repayment deadline, will be treated as though it had not received a covered loan for purposes of the employee retention credit and may therefore be eligible for the credit.

Accordingly, employers should consider the employer retention credit and evaluate if they qualify.

  • The credit is available to all employers regardless of size, including tax-exempt organizations, except state and local governments and their instrumentalities and small businesses that take small business loans.
  • The amount of the credit is 50% of qualifying wages paid up to $10,000 in total. Wages paid after March 12, 2020, and before January 1, 2021, are eligible for the credit. Wages taken into account also include a portion of the cost of employer provided health care.
  • Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. They can use the credit against their required deposits of payroll taxes that have been withheld from employees' wages by the amount of the credit.