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Questions and Answers on Employee Retention Credit and FICA Deferral During the Pandemic

On April 24, 2020, the White House passed the second wave of relief for businesses affected by the coronavirus pandemic, providing another $310 billion to fund the Paycheck Protection Program.

Other options also exist for business owners seeking to make payroll and stay in business during these challenging times. ACE Workforce CEO Alan Klein recently hosted a webinar, CARES Act and Funding Options Beyond PPP,  discussing the  Employee Retention Credit and FICA deferral.

Q.

What is the Employee Retention Credit?

A.

The Employee Retention Credit is a fully refundable credit equal to 50% of qualified wages up to $10,000 for a maximum credit of $5,000 per employee.

Q.

How does a company qualify for the credit?

A.

An employer qualifies if:
– Operations are fully or partially suspended during any quarter in 2020 due to a governmental order
or
– The employer experiences a decline of 50% or more in gross revenue for any quarter in 2020 over the same quarter in 2019.

Q.

Does the size of the company affect the credit?

A.

Yes. Companies with 100 or fewer employees may utilize the credit for all employees. Companies greater than 100 employees may only utilize the credit for wages paid while an employee is not performing services.

Q.

Can a company use the ERC if they have taken a PPP loan?

A.

A company may not utilize both the employee retention credit and a PPP loan; it is either one or the other.

Q.

When must a company stop taking the Employee Retention Credit (ERC)?

A.

An employer must stop taking the ERC on the first day of the quarter following the quarter in which gross receipts are greater than 80% of the gross receipts for the same quarter in 2019 or on the last day of 2020.

Q.

How does the FICA Deferral work?

A.

FICA deferral permits employers to defer a portion of their payroll taxes to help fund operating expenses and payroll during the pandemic.

Q.

Can a company use the FICA deferral in conjunction with the PPP or ERC?

A.

A company may defer their portion of FICA if they took a PPP loan until the day the loan receives forgiveness – deferral must stop effective that date. A company utilizing the ERC may also defer their portion of FICA through the remainder of 2020.

Q.

When are deferred FICA payments due to the IRS?

Deferred FICA must be paid 50% at the end of 2021 and 50% at the end of 2022.

Make sure to visit the rest of our ACE Master resource center to view all our webinars and read the rest of our blog posts related to the COVID-19 pandemic and coronavirus relief for businesses.

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