IRS and Coronavirus Tax Relief for Businesses

IRS and Coronavirus Tax Relief for Businesses

With a reenergized COVID-19 ripping much of the southern and western U.S., businesses are once again facing the possibility that shutdown orders may be necessary to ensure public health. While the government is currently in the process of negotiating the HEALS act to provide a second round of COVID-19 tax relief, businesses currently facing hardships or worried about potential shutdowns should be aware of the options still available to them from existing relief programs.

Two such programs are the Employee Retention Credit, and the paid leave offered by the Families First Coronavirus Response Act. Both are designed to minimize the burden on employers faced with the costs of maintaining a payroll at a time when revenues are way down. Eligible businesses taking advantage of these programs stand to gain significant relief – representing up to half of the payroll taxes and 100% of paid employee sick leave – which, in such a precarious economic environment, could be the difference between closing up shop permanently or emerging from the pandemic ready to fight another day. 


Employee Retention Credit

The Employee Retention Credit is a refundable tax credit designed to help businesses by reducing 50% of the tax burden on eligible wages they pay to employees between March 12, 2020, and January 1, 2021. Businesses can access the credit by immediately reducing their regular employment tax deposits, and small businesses whose deposits aren’t large enough to cover the credit are even eligible for an advance IRS payment. 

There are conditions on the credit, and not all businesses are automatically eligible. To qualify for the credit, businesses must be operating during the 2020 calendar year, must have fully or partially suspended operations due to a COVID-related government order, and also must have experienced a “significant decline in gross receipts.” 

Businesses that do qualify can apply for the credit on all qualified wages. Qualified wages cover the wages and healthcare costs (up to $10,000) for all staff of businesses that averaged fewer than 100 employees in 2019, and for staff not providing services for business that averaged over 100 employees in 2019. 

Click here for full details on the Employee Retention Credit. 


Families First Coronavirus Response Act

The Families First Coronavirus Response Act is legislation designed to provide funds to all businesses in the United States with 500 or fewer employees so that paid leave can be offered to employees either to tend to their own health during the pandemic or to care for their family members. The Act represents a huge relief to both businesses and employees alike in a time of extreme economic uncertainty. 

The Act provides employees with up to 80 hours of paid sick leave and expanded paid childcare during school closures and times where childcare is unavailable or difficult to obtain. The Act only applies in COVID-related cases, but in those cases, it provides employers with 100% reimbursement coverage, including healthcare costs. Self-employed individuals can also receive an equivalent credit, and there is no payroll tax liability on paid leave issued under the Act. 

Because of the immediate need for relief, businesses can access funds from the Act by drawing from money otherwise put aside for their own payroll taxes, and will then enjoy a 30-day non-enforcement period on the requirements of the Act in cases where payroll tax funds have been used in good faith. 

Click here for full details on the Families First Coronavirus Response Act


As an ISO, your business may qualify for these relief programs if you’ve suffered COVID-related economic strain. However, equally importantly, your merchants, who may be seriously struggling, can also potentially benefit from these programs. It’s in your ISO’s best interests to stay informed on the financial health of your merchant partners during the pandemic, since your success is built on their success. Providing merchants with information on ways they can tap into relief programs is a great way to both ensure they’re getting the assistance they need, but also to generate goodwill and demonstrate the elevated service that generates long-term loyalty. Both are keys to your long-term residual growth and the success of your business.

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