{"id":5647,"date":"2020-04-02T20:02:00","date_gmt":"2020-04-02T20:02:00","guid":{"rendered":"https:\/\/www.dinsmore.com\/?post_type=publications&p=5647"},"modified":"2025-11-21T19:42:53","modified_gmt":"2025-11-21T19:42:53","slug":"cares-act-offers-social-security-tax-deferral-and-tax-credit-for-certain-employers-hurt-by-the-covid-19-pandemic","status":"publish","type":"publications","link":"https:\/\/www.dinsmore.com\/publications\/cares-act-offers-social-security-tax-deferral-and-tax-credit-for-certain-employers-hurt-by-the-covid-19-pandemic\/","title":{"rendered":"CARES Act Offers Social Security Tax Deferral and Tax Credit for Certain Employers Hurt by the COVID-19 Pandemic"},"content":{"rendered":"\n
\"Tax<\/figure>\n\n\n\n

Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act<\/em> (the \u201cCARES Act<\/em><\/strong>\u201d) (H.R. 748) offers a refundable credit against an eligible employer\u2019s share of Social Security payroll taxes (6.2%) for 50% of up to $10,000 in qualified wages paid to each employee between March 13 and December 31, 2020, while the employer is forced to partially or fully suspend operations, or has decreased gross receipts due to the COVID-19 epidemic (the \u201cEmployee Retention Credit<\/em><\/strong>\u201d).<\/p>\n\n\n\n

In addition, Section 2302 of the CARES Act offers certain employers the ability to defer payment of the 6.2% employer\u2019s share of the Social Security payroll tax on wages paid, and self-employed individuals the ability to defer payment of 50% of the 12.4% self-employment tax on self-employment income received, from March 27, 2020 through December 31, 2020. In each case, 50% of the deferred tax is due by December 31, 2021, and the remaining 50% is due by December 31, 2022.<\/p>\n\n\n\n

Section 2301 Employee Retention Credit<\/strong><\/p>\n\n\n\n

Eligibility<\/em><\/strong><\/p>\n\n\n\n

To receive the Employee Retention Credit for a calendar quarter, an employer must be an \u201celigible employer\u201d carrying on a trade or business, including a tax-exempt organization, in 2020 that either:<\/p>\n\n\n\n

    \n
  1. Was fully or partially suspended during one or more calendar quarters due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 (a \u201cShutdown<\/em><\/strong>\u201d); or<\/strong><\/li>\n\n\n\n
  2. Experienced a significant and continuing decline in gross receipts<\/em>[1]<\/a> for one or more calendar quarters in which the trade or business remained open. A significant decline in gross receipts occurs in a calendar quarter, beginning after December 31, 2019, when gross receipts of the trade or business are fewer than 50% of the gross receipts<\/strong> for the same calendar quarter in the prior year. So long as the business satisfies the other requirements of the credit, the significant decline in gross receipts continues for each calendar quarter until gross receipts exceed<\/strong> 80% of the gross receipts<\/strong> for the same calendar quarter in the prior year.<\/li>\n<\/ol>\n\n\n\n

    \u201cQualified wages<\/em><\/strong>\u201d eligible for the Employee Retention Credit under the CARES Act depend on an employer\u2019s number of employees:<\/p>\n\n\n\n

      \n
    1. If the employer\u2019s average number of full-time employees[2]<\/a> in 2019 was 100 or fewer<\/strong>, qualified wages will include (1) wages paid during a Shutdown; or (2) wages paid during a significant decline in gross receipts, without regard<\/strong> to whether the employee provided services to the employer during this time or not.<\/li>\n\n\n\n
    2. If the employer\u2019s average number of full-time employees in 2019 was greater than 100<\/strong>, qualified wages will include (1) wages paid during a Shutdown; or (2) wages paid during a significant decline in gross receipts, but only for<\/strong> wages paid while the employee was not providing services<\/strong> to the employer in either circumstance.<\/li>\n<\/ol>\n\n\n\n

      Limitations on Qualified Wages<\/em><\/p>\n\n\n\n