The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 will provide a second-round economic stimulus for individuals, families, and businesses. This legislation has multiple measures that are put into place under the current CARES Act.
The Employee Retention Credit and higher-impact modifications under the COVID-19 pandemic relief package are designed to help companies keep their best workers from leaving. Here is a summary of what is included in this package:
- Up to 50% in payroll deduction on qualifying wages paid after March 13 through December 31, 2020
- Team member wages of up to $10,000 per person
- Reduced federal tax deposits for any withholdings that are payroll-related
- The ability to apply for an advance if guarantees are not sufficient
How can this credit be reported?
The IRS has released new forms that you can use to report your advance credit for the first quarter of 2020 tax reductions. These include Federal Form 7200, which was available exclusively until March 13 and is now obsolete; it’s been replaced by Federal Form 941H, effective during Quarters 2 – 4 of 2020.
The qualified wages credit is an integral part of the new tax law. This benefit can help you save money on your taxes by increasing how much employers must contribute to employee healthcare coverage, even if they don’t pay any other kind of commission into those plans. The credit is available to organizations that are instrumental in providing essential services and care, such as colleges or universities and organizations that provide medical care.
The extension of this tax credit will help small businesses and nonprofits by keeping more workers on the payroll. Tax professionals can determine if their clients qualify for Employee Retention Credit, Paycheck Protection Program loans, or both benefits to ensure they are getting maximum value out of every dollar spent.