We apologize for the numerous emails recently. We don’t want to flood your email inbox. However, there are many critical pieces to the laws recently passed that affect us all. Thus, we feel obliged to pass this info to you in a timely manner so that you can make the critical decisions, which affect both your businesses and you personally. As additional guidance is provided, we will update our blog page directly at www.cpawyo.com so please refer to it for updates or to review our prior posts. For example, the DOL recently provided questions and answers guidance to the mandated paid leave law, click here. Refer to questions 4, 58 & 59 for rules regarding exempting businesses with less than 50 employees from this mandate. Of course, you can always call us directly with questions. Now for the latest:
Many of you have asked recently, “Do I have to pay my payroll taxes now?” The answer may be no, but only if you qualify for a payroll tax credit under either of the two Covid-19 response acts passed recently. We detailed the availability of a payroll tax credit under the new mandated paid leave law in an email dated March 27, 2020.
Under the CARES Act passed last Friday, there is a new payroll tax credit called the Employer Retention Credit allowed to businesses and nonprofits. This allows you to take a credit against your payroll taxes equal to 50% of qualified wages paid to each employee for wages paid after March 12, 2020. Your business can qualify for this credit in one of two ways.
- Your business operations were completely or partially suspended by the order of an appropriate government authority due to Covid-19. In Wyoming bars, restaurants, gyms, salons and many other business types were mandated to close or partially close. In addition, many medical and dental offices are only allowed to perform emergency services by the direction of the CDC.
- Your business remains open, but your gross income in any 2020 calendar quarter is less than 50% of revenue from the same calendar quarter in 2019. For example, in 1st qtr 2020, your revenue was $150,000, but in 1st qtr 2019, it was $301,000.
If either of these applies to you and you continue to pay wages to employees, please let us know. You can take a credit for 50% of those wages (up to a maximum credit of $5,000 per employee for 2020) against your payroll taxes. If the calculated credit exceeds your payroll tax liability, then you get the excess refunded from the IRS. Wages paid also include employer-paid qualified health care expenses. However, if you receive an SBA 7(a) Paycheck Protection Program Loan as detailed in our email dated March 28, 2020, then you do not qualify for this credit.
Understand that by offering this employer retention credit, the paid leave credit and the SBA loans that can be forgiven, the government wants business owners to continue paying their employees. If you do and you meet the applicable standards, then the government is essentially covering your employee’s pay with these credits. However, there is a risk to you the business owner. For example, to meet qualification (2) above, your gross income in a 2020 calendar quarter must be less than 50% of gross income for the same quarter in 2019. Are you reasonably comfortable that your 2nd qtr 2020 income will be less than 50% of 2nd qtr 2019 income? You can’t be 100% certain so you run the risk of having to cover your employees’ payroll cost if it doesn’t end up being less than 50%.
As always, call or email us with any questions and please stay healthy!!