United States

Hurricane Disaster Zone Employee Retention Credit

A federal tax credit for businesses affected by a natural disaster

Congress recently enacted legislation which provides a federal income tax credit to certain employers who continue to pay their employees during periods that their place of business is in operable due to the effects of one of the three recent hurricanes.

 

The credit, known as the Employee Retention Credit (ERC), is a general business credit and can be carried back one year and forward 20 years.  The credit is available to employers of all sizes.

 

 

What you need to know about the Employee Retention Credit...

What does the Employee Retention Credit offer?

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— 40% of qualified wages paid to each employee during inoperability

— $6,000 in maximum wages, therefore maximum credit is $2,400 per employee

A business is inoperable if physically inaccessible to:

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— employees

— raw materials

— utilities

— customers

In order to be eligible for the credit, the employer must:

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have operated active trade or business in disaster area

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be declared a federal disaster zone

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have been inoperable after effective date of disaster

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not claim both the Work Opportunity Tax Credit (WOTC) and the employee retention credit for same employee for same period

Helpful definitions

Hurricane Disaster Zone Hurricane Disaster Area Eligible Employer Eligible Employee Qualified Wages
Portion of hurricane disaster area determined by the President to warrant public assistance. Area where a major disaster has been declared by the President before September 21, 2017. Employer whose principal place of business was in a disaster zone before the hurricane and became inoperable because of the hurricane. Employee whose principal place of employment was in a disaster area and the business became inoperable because of the hurricane. Wages paid by eligible employer to eligible employee on any date after the storm to January 1, 2018, during period business first became inoperable before storm to date when business resumes significant operations.

KPMG can help...

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Analyze potential client locations

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Identify eligible employees and calculate eligible wages

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Assist in determining closure dates

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Determine no double counting of wages between ERC and WOTC

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Identify inoperable client locations

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Determine process and prepare tax technical memorandums

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Determine when operations resumed

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Prepare applicable tax forms

Contact us

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Karen Field

Principal-in-Charge, Compensation & Benefits Group

E: kfield@kpmg.com

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