Methods for Claiming Employee Retention Credit for Employers Subject to Closure Due to COVID-19 Crisis

As we continue to unwind and understand the nuances of the Coronavirus Aid, Relief, and Economic Security Act (“CARES” Act), the IRS has issued some additional guidance on the Employee Retention Credit and how to claim the credit.

Understanding the Credit:

Please see Schneider Downs’ previously published Our Thoughts On article that dissects who is eligible for the Employee Retention Credit, how the credit is calculated, and other important details. 

How to Claim the Credit:

1) Reduction of upcoming deposits due with the applicable quarterly employment tax returns (Form 941 for most employers)

2) Requesting an advance credit by filing Form 7200 (Advance of Employer Credits Due to COVID-19)

** On April 3, 2020, the IRS added a note to the Form 941 instructing that regardless of the method, the credit should initially be claimed on the 2nd quarter filing of the employment tax returns.  Wages related to the timeframe before the 2nd quarter begins (March 13, 2020 through March 31, 2020) should be incorporated into the 2nd quarter calculation.  DO NOT INCLUDE any wages or credits relating to the Employee Retention Credit on the 1st quarter employment tax returns.

As a reminder, if an employer receives a loan under the Paycheck Protection Program, then the employer cannot claim an Employee Retention Credit for the same wages.  Also, wages for this credit do not include wages for which the employer can claim a credit for paid sick and family leave under the Families First Coronavirus Response Act or Work Opportunity Tax Credit.

Please contact your Schneider Downs tax advisor if you have any questions or would like to discuss the provisions of the CARES Act and or the Families First Coronavirus Response Act.