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As a small business, the coronavirus pandemic has presented countless challenges mainly as a result of lockdowns and social distancing restrictions. This has forced governments to come to the rescue by providing funding and tax breaks. Apart from the government, other organizations have also stepped in to help small businesses to survive and keep offering services during and after the virus. However, the biggest help for small business owners comes from the IRS in the form of tax credits. Some of the benefits that the IRS has promised to offer include new credits for the employers that include the employee retention credits and credits for paid sick leave and family leave. With these credits, you can save your small business from the effects of the pandemic while ensuring that your employees are protected as well. Here are some of the tax credits that can help you and how they work.

Employee retention credit

Employee retention credit is a refundable payroll tax credit that is paid retained to employees between March 13 and December 31, 2020. It is available for employers whose gross receipts decline compared with last year or those that have to shut down entirely or partially due to the orders by the government.  This credit amounts to 50% of as much as $10,000 in qualified wages paid to the employees. This includes planned expenses. However, due to the $10,000 wage cap, the maximum amount of the credit is $5,000 per employee. This package is applied using the employer’s share of Social Security and railroad retirement benefit taxes. However, since the amount is refundable, employers can refund even if it exceeds the taxes owed. For an employer to receive this credit and request an advance in the form of a check, they can reduce the amount of federal taxes that they are depositing.

Credits for paid sick leave and family leave

This is a new relief that provides options for the employees that get the coronavirus, those who must care for another person with the coronavirus or those who have to care for kids because their daycare or schools have shut due to the coronavirus pandemic. The employers that pay out the needed sick leave or family leave credits receive a credit for the full amount that is paid out. The circumstances under which employees qualify for the paid leave include:

  • Those who cannot work due to quarantine or because they are suffering from the coronavirus symptoms or are waiting for diagnosis are eligible for up to 10 days of paid sick leave. The maximum payment is $511 a day, which translates to $5,110 for the ten days. 
  • Employees that cannot work because they are taking care of a relative or a friend with coronavirus. It is also applicable to employees whose children become unavailable due to a coronavirus-related reason. Both these groups of employees are eligible for a $200 maximum payout daily and $2,000 in 10 days. 
  • Employees who cannot go to work or work because they must attend to their children whose schools or daycare are closed due to the coronavirus-related issue also qualify for paid family and medical leave for up to 10 weeks. These employees qualify for up to a maximum of $200 daily and $10000 in 10 days.

As an employer, you can claim the entire amount paid out for this leave and any other health plan expenses. Please take advantage of these credits and their availability as this will make the difference in keeping your small business operations and keep critical members of staff on the payroll even when they are not working. This will be a win-win for the employees, the government, and your business in the long run.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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