On March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law [Pub. L. 116-136]. The economic stimulus legislation contains many payroll provisions.
Delayed Payment of Employment Taxes
Employers can defer payment of their 6.2% employer share of social security taxes due between the date of enactment (March 27, 2020) and before January 1, 2021. Employers will be required to deposit 50% of the amount due by December 31, 2021, and the remaining 50% by December 31, 2022.
Employer Retention Credit
The CARES Act provides a tax credit that is intended to help employers retain employees on their payroll. Employers may claim a payroll tax credit against “applicable employment taxes” (the employer share of social security taxes) for each calendar quarter equal to 50% of the qualified wages paid to employees.
An “eligible employer” is one that had its operations fully or partially suspended during the calendar quarter due to government orders limiting business activities or that has suffered a loss of 50% in gross receipts compared to the same period in the previous year due to COVID-19.
Qualified wages for the credit per employee are capped at $10,000 per quarter (and include certain employer-paid qualified health plan expenses). Employers with more than 100 full-time employees (as defined under the Affordable Care Act) can claim the credit on wages paid to employees who are retained but not working due to COVID-19. Employers with fewer than 100 employees can claim the credit for wages paid to all employees.
Additional Payroll Provisions
The CARES Act also includes provisions creating “paycheck protection” loans for small businesses, extended relief for federal student loan borrowers, relaxed rules for COVID-19-related withdrawals and loans from qualified retirement plans, and extended unemployment insurance benefits.
Courtesy of the APA