American Rescue Plan: Check Out The Small Business Tax Credit Programs

Employee Retention Credit

The American Rescue Plan extends the availability of the Employee Retention Credit for small businesses through December 2021. It allows companies to offset their current payroll tax liabilities by up to $7,000 per employee per quarter.

This credit of up to $28,000 per employee for 2021 is available to small businesses that have seen their revenues decline or even been temporarily shuttered due to COVID.

For FY2020

For 2020, the ERC is a tax credit against certain payroll taxes, including an employer’s share of social security taxes for wages paid between March 12, 2020, and December 31, 2020.

The tax credit is 50% of the wages paid up to $10,000 per employee, capped at $5,000 per employee. If the amount of the tax credit for an employer is more than the amount of the employer’s share of social security tax owed, the excess is refunded – paid – directly to the employer.

If your business is eligible for the ERC for 2020 and you have not yet claimed the credit, you can file amended payroll tax forms to claim the credit and receive your tax refund.

WILD WEST: $2 million for the pilot program was allocated from the American Rescue Plan Act.https://t.co/WHLEgLaTFy pic.twitter.com/Xsy5E4mIj6

— Fox News (@FoxNews) September 18, 2022

Businesses that took out PPP loans in 2020 can still claim the ERC, but they cannot use the same wages to apply for forgiveness of PPP loans and to count toward the ERC.

If your business had payroll costs that were more than the amount covered by your PPP loan, you might be able to claim tax credits for those additional payroll costs.

For FY2021

The ERC is now available for all four quarters of 2021. The amount of the maximum tax credit has been increased to $7,000 per employee per quarter, and the level of qualifying business disruption has been reduced so that a 20% decline in gross receipts during a single quarter will make a business eligible for a maximum benefit of $28,000 for the entire year.

Key Documents

Employee Retention Credit 2020 & 2021 One-pager

Employee Retention Credit Snapshot

Employee Retention Credit Quick Reference

Paid Leave Credit

The American Rescue Plan extends through September 2021 the availability of Paid Leave Credits for small and midsize businesses that offer paid leave to employees who may take a break due to illness, quarantine, or caregiving.

Companies can take dollar-for-dollar tax credits equal to wages of up to $5,000 if they offer paid leave to be sick or quarantining employees.

Altogether, my American Rescue Plan, the Bipartisan Infrastructure Law, the Inflation Reduction Act, and the CHIPS and Science Act invest more than $135 billion to advance America's electric vehicle future.

Charging up will be as easy as finding a gas station.

— President Biden (@POTUS) September 14, 2022

For FY2020

Beginning in early 2020, as part of the CARES Act, businesses with fewer than 500 employees were required to provide paid sick leave and family leave to employees dealing with the inevitable consequences of the ongoing pandemic.

Under the law, businesses are entitled to a tax credit equal to 100% of the paid sick leave and paid family leave provided to employees.

The 2020 sick leave rules required businesses to provide up to 80 hours of paid leave at either:

1. The employee’s regular wage, capped at $511/day up to a total of $5,110 if the employee was sick or quarantined; or
2. Two-thirds of the employee’s regular wage, capped at $200/day up to a total of $2,000, if the employee was taking time to care for someone else who was quarantined or a child whose school or child care was closed due to COVID.

The American Rescue Plan brought economic relief to millions by helping to protect union workers' hard-earned pensions.

It’s one of the biggest actions for union workers and retirees in decades.

Not a single Congressional Republican voted to protect those pensions — not one.

— President Biden (@POTUS) September 10, 2022

The 2020 family leave rules required businesses to provide up to ten additional weeks of leave for employees who cannot work because they need to care for children whose school or regular child care is unavailable due to COVID.

Those employees are entitled to two-thirds of their average wages, capped at $200/day up to $10,000.

Businesses that paid employees under these programs from April 1, 2020, through December 31, 2020, can take the tax credit against their payroll taxes. If the amount of the credit exceeds a business’s portion of its employment taxes, then the excess is refunded directly to the company.

If your business provided paid leave to employees in 2020 and you have not yet claimed the credit, you can file amended payroll tax forms to claim the credit and receive your tax refund.

Millions of retirees were at risk of losing their retirement security, so with the American Rescue Plan, we protected their pensions. It’s one of the most significant achievements for union workers and retirees in over 50 years.

Not a single Republican voted for it.

— Joe Biden (@JoeBiden) September 12, 2022

For FY2021

Although the law no longer requires businesses with 500 or fewer employees to offer paid leave as part of the continuing COVID-relief efforts, if a company provides paid leave to its employees, it can claim these dollar-for-dollar tax credits for wages paid through September 30, 2021. These credits can be claimed against payroll taxes every quarter.

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