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RJS Law - A Tax Law Firm

RJS Law: San Diego Tax Attorney & Lawyer | CPA | IRS | FTB | California

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SOUTHERN CALIFORNIA’S FINEST
LAW FIRM

COMPLIMENTARY CASE EVALUATION

SAN DIEGO
(619) 595-1655
ORANGE COUNTY
(949) 535-2000
El CAJON
(619) 595-1655
  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration
        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • International Taxes
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • Estate Planning
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Criminal Defense
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
    • NOTICES
      • IRS Notices
      • IRS Letters
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      • Avisos en Español
  • Tax Institute
  • Blog
  • Testimonials
  • Giving
    • RJS Law Donates Billboard to the Girl Scouts
  • Awards
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    • SD50 Extraordinary Leadership
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  • Contact

WINNER OF THE UNION TRIBUNE SAN DIEGO'S BEST TAX LAW FIRM

 


5 YEARS IN A ROW

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Contact
Blog
  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration
        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • International Taxes
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • Estate Planning
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Criminal Defense
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
    • NOTICES
      • IRS Notices
      • IRS Letters
      • FTB Notices
      • Avisos en Español
  • Tax Institute
  • Blog
  • Testimonials
  • Giving
    • RJS Law Donates Billboard to the Girl Scouts
  • Awards
    • Events
    • SD Metro San Diego’s Top Attorneys 2020
    • SD50 Extraordinary Leadership
    • Media
    • Video Gallery
    • USD Feature Story
    • Publications
  • Contact

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COVID-19 Employee Retention Credit

COVID-19  Employee Retention Credit
COVID-19 Employee Retention Credit

COVID-19 Employee Retention Credit

COVID-19 continues to have detrimental effects across the globe in many ways uncovering the need for a COVID-19 Employee Retention Credit. In the United States, many states have enacted stay-at-home orders. These measures to prevent its spread. Although necessary, these measures have devastated entire industries. This leads employers to wonder if they will have to shut down and employees to wonder if they still have a job.

On March 27, 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This is in response to the destruction caused by COVID-19. It was designed to encourage Eligible Employers to keep employees on their payroll despite the economic hardships. The CARES Act includes a tax credit called the Employee Retention Credit (Credit).

What is the Credit?

It is a fully refundable tax credit for Eligible Employers equal to 50% of total qualified wages, including allocable qualified health plan expenses. It applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000. Therefore, the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.

Does my business qualify for the Credit? The credit is available to all employers regardless of size, including tax-exempt organizations.

There are two exceptions:

  • State and local governments and their instrumentalities.
  • Small businesses that receive a Small Business Interruption Loan (“Paycheck Protection Loan”) under the Paycheck Protection Program authorized under the CARES Act.

There are two ways to qualify:

  • The employer’s business is fully or partially suspended by government orders limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19 during the calendar quarter.
  • The employer experiences a significant decline in gross receipts that are below 50% of the comparable quarter in 2019.
    • Once gross receipts exceed 80% of a comparable quarter in 2019, they are no longer eligible after the end of that quarter.
    • These measures are calculated each calendar quarter.
    • Note: Self-employed individuals cannot receive this credit for self-employment services or earnings.

What are qualified wages?

Qualified wages are wages and compensation paid by an Eligible Employer to employees after March 12, 2020, and before January 1, 2021. This includes the Eligible Employer’s qualified health plan expenses that are properly allocable to the wages. Qualified wages taken into account for an employee cannot exceed what the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship.

The definition of qualified wages is partially dependent on the average number of full-time employees employed by the Eligible Employer during 2019.

  • Employees with more than 100 employees: credit is allowed only for wages paid to employees who did not work during the calendar quarter for one of two reasons: (1) a full or partial suspension of operations by order of a governmental authority due to COVID-19, or (2) a significant decline in gross receipts.
  • Employers with less than 100 employees: credit is based on wages paid to all employees, regardless if they worked or not, during any period of economic hardship due to (1) or (2) described above.

Do I have to claim the Credit?

No. The CARES Act does not require employers to pay qualified wages; therefore Eligible Employers are not required to claim the Employee Retention Credit.

Does the Credit apply against any employment taxes?

Yes. It is allowed against the employer portion of social security taxes and the portion of taxes imposed on railroad employers under section 3221(a) of the Railroad Retirement Tax Act (RRTA), which corresponds to the social security taxes.

What makes the Credit fully refundable?

It is fully refundable, because the Eligible Employer can get a refund if the amount of the credit is greater than certain federal employment taxes that the Eligible Employer owes. For any calendar quarter the amount of the credit the Eligible Employer is entitled to exceeds the employer portion of the social security tax on all wages paid to all employees (or on all compensation for employees subject to RRTA), the excess is treated as an overpayment and refunded to the employer. The excess will be applied to offset any remaining tax liability on the employment tax return. The amount of any remaining excess will be reflected as an overpayment on the return. Like other overpayments of federal taxes, the overpayment will be subject to offset prior to being refunded to the employer.

If I am an eligible employer, how do I receive the Credit?

Eligible employers can immediately be reimbursed for the Credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit. Eligible employers must report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns (typically Form 941) beginning with the second quarter.

If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS if they submit Form 7200, Advance Payment of Employer Credits Due to COVID-19. Additionally, eligible employers can request an advance of the Employee Retention Credit by submitting the same Form 7200.  

If I am an eligible employer, can I receive tax credits for both the Credit and the Families First Coronavirus Relief Act (FFCRA)? Yes. However, the same wages cannot be counted for both the Employee Retention Credit and the FFCRA. The FFCRA requires certain employers to pay sick or family leave wages to employees unable to work or telework due to particular circumstances in relation to COVID-19. Under FFCRA, employers are entitled to a refundable tax credit for the required leave paid, up to specified limits.

Published by Lauren Lee and Jesan De Leon

Filed Under: COVID-19, Tax Law Tagged With: California Tax Attorneys, California Tax Lawyers, COVID-19 Employee Retention Credit, Employee Retention Credit, San Diego Tax Attorney, san diego tax lawyer, Tax Attoney, tax attorney san diego, tax lawyer, Tax Lawyer San Diego, Tax Lawyers San Diego

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