Tax Relief Provisions Small Business Owners Should Know About

The COVID pandemic has led to significant new legislation that allows for additional tax relief. For example, the Employee Retention Tax Credit (ERTC) is a refundable payroll tax credit for businesses that experienced a downturn in sales because of the pandemic.
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In this article, we will review some of the tax relief options available and how you can take advantage of applying them to your 2021 tax return.


Employee Retention Tax Credit

The Employee Retention Tax Credit has been provided to help assist employers with wage expenses as they navigate a slowed economy due to the pandemic. Calculating your tax credit can be somewhat complex but a great first step is ensuring your bookkeeping is up to date. 

The IRS provides information on the allowed amount of said tax credit:

“Eligible employers can now claim a refundable tax credit against the employer share of Social Security Tax equal to 70% of the qualified wages they pay to employees after December 31, 2022, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.” Source

It is not too late to apply for these credits, either. To be eligible, the following must be accurate as applied to the January 1, 2021 – June 30, 2021 period:

  1. Your business operations were either completely or partially suspended due to government orders. This includes limiting commerce, group meetings, or travel.

  2. Your business experienced a gross receipts decline of less than 80% in the corresponding 2019 quarter.

There are some exceptions and additional regulations regarding applying for this tax credit, so we do recommend meeting with your tax advisor to confirm you are still eligible. To meet with one of our ProAdvisors, click the button below:

To see the IRS publication on this tax credit, click here.  


Emergency Paid Sick Leave Act (EPSLA)  

Many employers found themselves dealing with low staffing numbers, for multiple reasons. If an employer experienced low staffing due to employees calling in sick to take care of themselves or their families, then this will likely cost the employer some resources.

As a response, employers are able to “claim refundable tax credits that reimburse them for the cost of providing qualified sick” (Source) leave beginning April 1, 2021, to September 30, 2021.

In order for the sick leave to be eligible, the employee must be:

  • Having symptoms pointing to COVID-19 and in the process of seeking a medical diagnosis

  • In the process of being tested for COVID-19

  • Receiving immunization from COVID-19 or recovering from said immunization

There are specifics regarding how to calculate the allowed credit, however, that is beyond the scope of this article. In short, there is a maximum amount of $511 per day or $5,110 total.

Please note, that this does differ from tax credits allowed for paid family leave. Which is time off for employees who need to take care of loved ones. This includes families who may be experiencing COVID or needing care as a result of immunization but it also includes taking care of children who may not be in school due to COVID-19 precautions.

There are specifics regarding how to calculate the allowed credit, however, that is beyond the scope of this article. In short, there is a maximum of $200 per day and $2,000 total. 

To see the IRS publication on this tax credit, click here.


Tax Credits Available For Providing Paid Leave to Receive Vaccinations 

For employers who looked to provide paid time off to their employees so they could receive vaccinations, a tax credit is available. Vaccinations were not always easily accessible when first released. Which sometimes meant employees had to take time off to drive to distant vaccination sites or wait in long lines.

As a result, a tax credit is available to those business owners who provided paid time off to their employees. The tax credit applied here is subject to the same limitations as the credit explained above in EPSLA.

Employers are allowed up to $511 per day or $5,110 for employees. For family leave, this is limited to $200 per day or $12,000 total.

To see the IRS publication on this tax credit, click here.

There is still tax relief available to employers who found their businesses struggling to work with the limitations provided by the pandemic. Tax credits are just one-way businesses can work to get their financial health back.

This publication is designed to provide information on federal tax and accounting laws and/or regulations. It is presented with the understanding that the author is not rendering legal or accounting services.

This text is not intended to address every situation that arises or provide specific, strategic tax and/or accounting planning advice. This text should not be used solely to answer tax and/or accounting questions and you should consult additional sources of information, as needed, to determine the solution to tax and/or accounting questions.

This text has been prepared with due diligence. However, the possibility of mechanical or human error does exist and the author accepts no responsibility or liability regarding this material and its use. This text is not intended or written by the practitioner to be used and cannot be used by a taxpayer or tax return preparer, for the purpose of avoiding penalties that may be imposed.

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