Employer Tax Credits

Under the CARES Act stimulus package, employers are eligibile for a number of tax credits.

Employee retention credit of 50% refundable payroll tax credit for wages up to $10,000.

  • Eligibility – Employers with businesses disrupted by virus-related shutdowns or experiencing a decrease in gross receipts of 50% or more when compared to the same quarter last year
  • The credit is available for employees retained but not working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees.

Employer-side Social Security payroll tax payments may be delayed until January 1, 2021, with 50% owed on December 31, 2021 and the other half owed on December 31, 2022.

Firms may take net operating losses (NOLs) earned from 2019-2020 and carry back those losses 5 years. The NOL limit of 80% of taxable income is also suspended, so firms may use NOLs they have to fully offset their taxable income.

Firms with tax credit carryforwards and previous alternative minimum tax (AMT) liability can claim larger refundable tax credits than they otherwise could.

The net interest deduction limitation, which currently limits businesses’ ability to deduct interest paid on their tax returns to 30%of earnings before interest, tax, depreciation, and amortization (EBITDA), has been expanded to 50 percent of EBITDA for 2019 and 2020. This will help businesses increase liquidity if they have debt or must take on more debt during the crisis.