Dispatch #28 - Employee Retention Credits Under the CARES Act

The CARES Act includes an “Employee Retention Credit” for employers whose gross receipts, in one or several calendar quarters of this year, are less than 50% of its gross receipts during the same quarter last year. The benefit is taken in the form of payroll tax credits or refunds and can be substantial—up to $5,000 per employee.

What you should do: 

Each quarter this year, compare gross receipts to the same quarter last year (Q1 this year vs. Q1 last year, etc.). If this year’s quarterly gross receipts are less than 50% of what they were last year, claim your payroll tax credit.

This is another reason to close the books on time (see Dispatch #23). The sooner your company closes the books, the sooner it will know whether it’s eligible for, and therefore, can take advantage of this credit.

Below are some additional notes and resources about the credit:

• The credit applies to the four quarters of this calendar year and wages and health care costs paid during the same

• The credit extends into your company’s “bounce back” quarter when gross receipts return closer to normal

• Benefits received under a PPP loan, FFCRA, and certain other programs limit the eligibility for this program

• Further reading: IRS FAQ page

• Further reading: section 2301 of the CARES Act

Need help with this or other financial matters faced by construction contractors? Let’s talk!

David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.