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The CARES Act makes a series of changes to the tax code that may benefit your business.
Where can I get more information for the below tax credits?
Interested businesses should consult a tax expert or reference the IRS for updated guidance. The IRS website will be updated as more information becomes available. The below is meant to provide an overview of changes made.
Employee Retention Credit
The U.S. Treasury and IRS launched the Employee Retention Credit on March 31, 2020. Eligible entities can receive a refundable payroll tax credit for 50% of up to $10,000 in qualified wages for retaining idled workers on their payrolls during the COVID pandemic.
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What wages qualify?
Qualified wages are based on the average number of a business’s employees in 2019. 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. For eligible employers with under 100 employees, all employee wages qualify for the credit. The credit is capped at the first $10,000 of compensation, including health benefits. The provision is effective for wages paid or incurred from March 12, 2020 to January 1, 2021.
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Who is eligible?
Employers regardless of size and tax-exempt organizations under 501(c) of the IRS, whose operations were fully or partially suspended due to a government shut-down order or gross receipts declined by more than 50% compared to the same quarter the previous year. Small businesses who take a Paycheck Protection Program loan are not eligible for this tax credit.
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How do I receive the credit?
See FAQ from the U.S. Treasury under “I am an eligible employer. How do I receive my credit?” Interested businesses should continue to reference the IRS for updated guidance.
Delay Payment of Employer Payroll Taxes
All employers and self-employed individuals may defer the 6.2% employer share of Social Security taxes for two years. Fifty percent of the deferred payroll taxes are due on December 31, 2021, and the remaining amounts are due on December 31, 2022.
Additional Tax Changes
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Business Expense Deduction Changes
Business Expense Deduction Limits are increased from 30% to 50% for 2019 and 2020. Additional rules apply to partnerships.
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Retail Tax
Retailers, restaurateurs and hotels will be able to immediately deduct qualified property improvements and amend previous year filings.
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Relaxes to Net Operating Loss Limits
Businesses will be allowed to carry net operating losses arising in the 2018, 2019, and 2020 tax years back five years. The taxable income limit is temporarily removed to allow a NOL to fully offset income for those years. Additional rules apply for life insurance companies.
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Alternative Minimum Tax
Corporations are able to accelerate their ability to recover the AMT credits from previous years and claim any resulting refund.
Other Technical Assistance Information & Relief
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Business Licenses
Illinois Department of Financial and Professional Regulation (IDFPR) Licensing (IDFPR) IDFPR is providing relief from professional licensing requirements, including extensions for licenses due March through July and waivers from certain continuing education requirements. Learn more about professional licensing.
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Tax Relief
- The IRS has released an FAQ to help small and midsize businesses navigate Paid Sick and Family Leave Tax Credits.
- The Illinois Department of Revenue has provided contact info for taxpayer resources while taxpayer assistance offices and phone lines are shut down. Learn more about contact info for taxpayer assistance.
- Penalties and interest for late payment of sales taxes owed from February through April will be waived for eating and drinking establishments that incurred a sales tax responsibility of less than $75,000 in CY2019. Learn more about sales tax penalties and interest.
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Unemployment Insurance
IDES has assembled FAQs about Unemployment Insurance and the COVID emergency.
- Workers laid off due to COVID qualify for UI so long as they are prepared to return to work.
- Workers sent home due to COVID illness or quarantine, or are caring for an affected family member, are also eligible for UI coverage.
- IDES is waiving the standard 1 week wait to be eligible for UI coverage.