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Employee retention credit-- what counts as wages?

I am trying to file form 7200 to get a refund. I have one employee in my business. I pay them once a month. Last check was paid on April 1, for the month of March. The employee is currently "laid off" because of the coronavirus stuff, but will be returning to work after everything is back on track. If the state I'm in only declared a disaster at the end of March (which caused businesses to close down), how much can I claim as a retention credit? Let's say for the sake of simplicity, the employee earned $2000 for the month of March, which was paid in a check on April 1. Do I then claim $1000 as the retention credit? Or do I need to calculate exactly how many hours the employee worked AFTER the governor announced the shut down? So, if the employee only earned $500 in the last week of work (AFTER the shut down was announced), then I would claim $250? Or do I just claim the full $1000, because I paid $2000 worth of wages "After March 12", based on the IRS website? 

Please help. 

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4 Replies
VictoriaD75
Employee Tax Expert

Employee retention credit-- what counts as wages?

Per the treasury:

Calculation of the Credit

 

The amount of the credit is 50% of the qualifying wages paid up to $10,000 in total

 

It is effective for wages paid after March 13th and before December 31, 2020

 

The definition of qualifying wages varies by whether an employer had, on average, more or less than 100 employees in 2019

 

Less than 100. If the employer had 100 or fewer employees on average in 2019, then the credit is based on wages paid to all employees whether they actually worked or not. In other words, even if the employees worked full time and got paid for full time work, the employer still gets the credit.

 

Greater than 100. If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

 

In both cases, “wages” includes not just cash payments but also a portion of the cost of employer provided health care.

 

Employee Retention Tax Credit

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Employee retention credit-- what counts as wages?

This doesn't answer my question, I've read this publication. Can you help me with my specific example?

Employee retention credit-- what counts as wages?

Too bad she wasn't able to answer your question. I have the same one. Maybe someone will come along who can help us. I'm also trying to find out if there is a way to claim the Employee Retention Credit on our regular tax return (instead of employment tax return).  I'll keep looking!

KathrynG3
Expert Alumni

Employee retention credit-- what counts as wages?

To claim the Employee Retention Credit, it is handled on the payroll reports.

 

For more information, see: New law extends COVID tax credit for employers who keep workers on payroll.

 

@streampaw

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