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COVID-19 Related Tax Credits

Guest Post: the following post is a sponsored guest post by IncentAdvise. All views and opinions represented in this post are the views and opinions of IncentAdvise and do not represent those of 500 Startups or any of its staff or affiliates.

The impacts of coronavirus have been felt by families, businesses, and the world as a whole. 

Unfortunately, many missed out on the PPP loan and the EIDL loan as banks struggled to meet demand. That is why incentAdvise has worked to find other options, such as the Employee Retention Credit and the Paid Sick Leave, to assist founders in finding instant benefit and cash advantage. 

This is a great opportunity for business owners to retain capital and extra cash by reducing the amount of payroll taxes they are paying. 

FAMILIES FIRST CORONAVIRUS RESPONSE ACT (“FFCRA”)

The Families First Coronavirus Response Act (“FFCRA”) was signed into place on March 18th, 2020 by President Trump to provide small and midsize employers refundable tax credits that reimburse them for some of the cost of providing paid sick and family leave wages to their employees related to COVID-19. 

PAID SICK LEAVE CREDIT OVERVIEW—

  • Employees have the opportunity to receive up to 80 hours of paid sick leave and expanded child-care leave when the school or care provider of an employee’s child or children is closed/unavailable.
  • Employers will receive 100% reimbursement for paid leave, including the costs of health insurance.
  • Businesses will retain and be able to access funds they would otherwise pay to IRS in payroll taxes.

PAID SICK LEAVE:

  1. What employees are eligible?

Any employee who is unable to work because of Coronavirus quarantine or self-quarantine, or has Coronavirus symptoms and is seeking medical diagnosis.

  1. What is the maximum credit I can receive? 

Employers may receive a refundable sick leave credit for sick leave paid at regular rate of pay, up to $511 per day for a total of 10 days.

  1. How is the credit refunded?

Payroll taxes that are available for retention include withheld federal income taxes, employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

PAID SICK LEAVE FOR EMPLOYEES AS CAREGIVERS:

  1.  What employees are eligible?

Any employee who is caring for someone with Coronavirus, or is caring for a child because of the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus is entitled to paid sick leave.

  1. What is the maximum credit I can receive? 

Employers may claim a credit for 2/3 of the employee’s regular rate of pay, up to $200/day for up to 10 days.

EXPANDED CHILD CARE LEAVE:

  1. What employees are eligible?

Any employee who is unable to work because of a need to care for a child whose school or place of care is closed or whose child care provider is unavailable due to the coronavirus is also entitled to paid family and medical leave.

  1. What is the maximum credit I can receive? 

2/3 of employee’s regular pay up to $200/day and $10,000 in total.  Up to 10 weeks of qualifying leave

CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT (“CARES”)

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law by President Trump on March 27th, 2020.  The CARES Act provides fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for American industries.

EMPLOYEE RETENTION CREDIT OVERVIEW—

The Employee Retention Credit under the CARES Act encourages businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

  1. How is the credit claimed?

The bill builds upon earlier versions of the CARES Act and is intended to be a third round of federal government support in the wake of the coronavirus public health crisis and associated economic fallout, succeeding the $8.3 billion in public health support passed two weeks ago and the Families First Coronavirus Response Act. 

It provides immediate access to funds that would normally been required to be deposited with the IRS.

The business owner can request advance credit on Form 7200, Advanced of Employer Credits due to COVID-19.

  1. What are the qualified businesses?
  2. Full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, 

OR

  1. A significant decline in gross receipts (Significant decline in gross receipts in current calendar quarter is less than 50% of the gross receipts from the same calendar quarter from calendar year 2019).
  1. What is the impact with other credits?
  2. Cannot take Employee Retention Credit if business received funds from Payroll Protection Program.
  1. Wages for Employee Retention Credit do not include wages for which the employer received a tax credit for Paid Sick Leave Credit or Family Leave under Families First Coronavirus Response Act.
  1. Wages counted for Employee Retention Credit cannot be counted for the credit for sick or family and medical leave under IRC 45S.
  1. Employees qualifying for WOTC are not counted for the Employee Retention Credit.

PAYROLL TAX DEFERRAL OVERVIEW—

The Coronavirus, Aid, Relief and Economic Security Act (CARES Act) allows employers to defer the deposit and payment of the employer’s share of Social Security taxes and self-employed individuals to defer payment of certain self-employment taxes.  These FAQs address specific issues related to the deferral of deposit and payment of these employment taxes. These FAQs will be updated to address additional questions as they arise.

  1. How is the credit claimed?
  2. Employers may defer, up to 50%, payment and deposit of the employment portion of employer payroll taxes due for the period March 27, 2020 through December 31, 2020.
  1. Defer up to 50% of the employer’s 2020 payroll taxes by December 31, 2021.
  1. The remaining 2020 employer payroll taxes must be paid by December 31, 2022.
  1. The taxpayer must remain updated on other pay periods payroll tax liabilities.
  1. If PPP funds are used and later forgiven, the payroll tax deposit deferrals will be available.
  1. What are the qualified businesses?

Qualified Businesses or Self-Employed taxpayers may defer paying 50% of their self-employment tax until the end of 2021 (25%) and the end of 2022 (remaining 25%).

For further information, or to begin working with incentAdvise to claim any of the above credits, please reach out HERE.

This post is a sponsored guest post by IncentAdvise. Any views or opinions represented in the above post are those of IncentAdvise and do not represent those of 500 Startups or any of its staff or affiliates unless explicitly stated. All content represented above is provided for informational purposes only. 500 Startups makes no representations as to the accuracy or completeness of any information contained in the above post. Under no circumstances should any of the above content be construed as legal, tax or investment advice from 500 Startups or any of its affiliates.

Under no circumstances should any information or content in this post, be considered as an offer to sell or solicitation of interest to purchase any securities advised by 500 Startups or any of its affiliates or representatives. Under no circumstances should anything herein be construed as fund marketing materials by prospective investors considering an investment into any 500 Startups investment fund.

Logos and trademarks of third parties referenced herein are the trademarks and logos of their respective owners. Any inclusion of such trademarks or logos does not imply or constitute any approval, endorsement or sponsorship of 500 startups by such owners

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