As of 04/03/2020 - One of the most common questions, frustrations, etc that I’ve heard this week, has gone along these lines. "How can I pay staff if there are no sales coming in due to our required shutdown?" And, I’ve tried to explain the answer, even though it follows an indirect path and timing was somewhat unknown at the start of the week.
As a business owner myself, I’ve asked the same question, and I have the same concerns. What I do know, is to do the math and figure it out. Rather than letting that thought run wild in my head and get emotional, just work it through, figure out the path and then decide based on facts which path I can or should take.
Make no mistake, the uncertainty does add a huge amount of stress. But, at least for me, the unknown is hardest part. So, if I can figure out a path, then that stress can be relieved somewhat. I spoke with a group of business owners earlier this week, about this topic, and about the relief programs around helping businesses with payroll. And now, to answer one of the bigger how questions, we have an answer today. So, here we go.
The topic is how to speed up the employee retention credit for paid sick or family leave benefits or employee retention credits.
As a reminder – employers (ER) may claim credits against their 6.2% OASDI taxes for:
The big question was the HOW and the WHEN around the credit. So, first, the ER can file for it on its quarterly payroll tax return, Form 941. (Filed 30 days after the end of the quarter, then wait weeks after that for the refund).
But the IRS has setup 2 alternative ways that ER’s can get cash more quickly.
Remember, there are other parts to the ER payroll relief, including deferral of payroll taxes, but this is in fact a tax credit for employers. And, by taking advantage of one of these faster methods, you may be able to answer the HOW question a bit easier.
So, get those payroll tax numbers and figure your 50%, and really consider how that would help your business.
PS – Remember, we are at a time of shifting sands, so if in doubt, go direct to the source, in this case, the IRS.
As a business owner myself, I’ve asked the same question, and I have the same concerns. What I do know, is to do the math and figure it out. Rather than letting that thought run wild in my head and get emotional, just work it through, figure out the path and then decide based on facts which path I can or should take.
Make no mistake, the uncertainty does add a huge amount of stress. But, at least for me, the unknown is hardest part. So, if I can figure out a path, then that stress can be relieved somewhat. I spoke with a group of business owners earlier this week, about this topic, and about the relief programs around helping businesses with payroll. And now, to answer one of the bigger how questions, we have an answer today. So, here we go.
The topic is how to speed up the employee retention credit for paid sick or family leave benefits or employee retention credits.
As a reminder – employers (ER) may claim credits against their 6.2% OASDI taxes for:
- 100% of their ER – paid sick leave and ER – paid family leave benefits paid under the Families First Coronavirus Response Act (FFCRA) to qualified employees for leave taken after March 31, 2020 through December 31, 2020; and
- The Employer Retention Credit of 50% of qualified wages paid to employees (EE), up to a $5000 maximum credit for wages paid after March 31, 2020 and before December 31, 2020.
The big question was the HOW and the WHEN around the credit. So, first, the ER can file for it on its quarterly payroll tax return, Form 941. (Filed 30 days after the end of the quarter, then wait weeks after that for the refund).
But the IRS has setup 2 alternative ways that ER’s can get cash more quickly.
- They can retain certain employment taxes instead of depositing them. The following can be retained:
- Federal Income taxes withheld for all EE’s’
- The EE’s share of Social Security and Medicare taxes (for the EE’s who received the paid benefits or qualified wages); and
- The ER’s share of Social Security and Medicare taxes for all employees
- This form will allow you to expedite a refund of credit due in excess of the amount of previously retained employment taxes.
- Per my sources, the IRS will try to issue refunds within 2 weeks.
- You may file the Form 7200 for an advance payment of the anticipated credits for a quarter at any time before the end of the month following the quarter in which the ER paid the qualified wages. If needed, you can file the form multiple times each quarter.
- File the Form 7200 by faxing it to: 855-248-0552
- Get the Form 7200 at the IRS website: www.irs.gov/forms-pubs/about-form-7200
Remember, there are other parts to the ER payroll relief, including deferral of payroll taxes, but this is in fact a tax credit for employers. And, by taking advantage of one of these faster methods, you may be able to answer the HOW question a bit easier.
So, get those payroll tax numbers and figure your 50%, and really consider how that would help your business.
PS – Remember, we are at a time of shifting sands, so if in doubt, go direct to the source, in this case, the IRS.
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