Tax News: IRS Guidance on Recapture of Employment Tax Credits
The Internal Revenue Service ("IRS") issued temporary and proposed regulations on the recapture of excess employment tax credits under the Families First Coronavirus Response Act ("FFCRA"), and the CARES Act. The regulations cover the reconciling of advance payments of the acts’ refundable employments tax credits and authorize assessments to recapture the credits, when necessary (T.D. 9904 and REG-111879-20).
Eligible employers are entitled to receive a refundable credit equal to the amount of the qualified sick leave wages and qualified family leave wages they are required to pay under the FFCRA, plus allocable qualified health plan expenses.
The CARES Act created an employee retention credit, which eligible employers can claim for paying qualified wages to employees. The employee retention credit is a refundable credit equal to 50% of qualified wages paid, with a maximum credit of $5,000 per employee. The credit is allowed against the employer’s Social Security taxes and Railroad Retirement Tax Act Tier 1 taxes but reduced by the amount of credits claimed under the FFCRA.
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