CARES Act: Payroll Tax Deferral and the R&D Tax Credit

Payroll tax deferral

The CARES Act was crafted to provide liquidity for businesses suffering from the effects of the COVID-19 outbreak. One provision postpones the employer portion of certain payroll taxes imposed in 2020. These will then be paid back in two installments:

• 50% due on December 31, 2021
• 50% due on December 31, 2022

R&D tax credit

For companies that opt to defer payroll taxes, R&D payroll tax incentives add value since excess credit amounts can reduce future obligations. Companies with SBA loans that are not eligible for COVID-19 payroll tax relief can still use R&D credits to offset FICA. Businesses that will soon age out of R&D payroll tax credits may opt to use them now and forgo the CARES Act deferral entirely.

R&D payroll tax incentives add value to maximize cash savings.

To maximize cash savings, companies should consider R&D tax credits as a part of their payroll relief options with COVID-19 aid packages. Certain eligibility requirements must be met to take advantage of the payroll tax incentive. Clarus R+D can help you navigate recent legislation to ensure you capture all available cash savings opportunities.