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The U.S. spent $30 billion to ditch textbooks for laptops and tablets: The result is the first generation less cognitively capable than their parents

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3 new coronavirus tax breaks businesses can take advantage of now

Anne Sraders
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Anne Sraders
Anne Sraders
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Anne Sraders
By
Anne Sraders
Anne Sraders
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May 17, 2020, 10:00 AM ET
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In case you missed it, the IRS recently rolled out three new tax credits aimed at helping businesses through the coronavirus pandemic.

As businesses and individuals across the country have been hit hard by coronavirus shutdowns, the government launched a slew of programs—from small business loans to enhanced unemployment—aimed at providing some relief.

The IRS recently reminded small businesses that, as part of the $2.2 trillion CARES Act, businesses have access to three tax credits: the Employee Retention Credit, the Paid Sick Leave Credit, and the Family Leave Credit—aimed at helping businesses cover required payments to employees amid the crisis, and keep them on the payroll.

Employee Retention Credit

For eligible businesses financially impacted by the coronavirus, the Employee Retention Credit is a fully refundable tax credit designed to help keep employees on the payroll. It’s 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19 (so the max credit is $5,000). To qualify, businesses’ operations must have been “fully or partially suspended” by government orders amid the coronavirus (like mandated shutdowns), or the employer’s gross receipts must be “below 50% of the comparable quarter in 2019.” Once that exceeds 80% of a comparable quarter in 2019, the business is no longer eligible after the end of that quarter.

If they qualify, employers can claim this credit for wages paid after March 12, 2020, and before January 1, 2021, per the IRS. Notably, the credit is available for businesses of all sizes, plus tax-exempt organizations.

However, the tax credit is not available for state and local governments (and their instrumentalities) and for small businesses who take small business loans like the Paycheck Protection Program.

Paid Sick Leave and Family Leave Credit

Additionally, businesses can get a Paid Sick Leave credit for employees who are unable to work (which also includes telework) due to coronavirus quarantine or self-quarantine, or if they’re seeking diagnosis for symptoms. According to the IRS, those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay up to $511 per day and $5,110 in total.

Employers can also get a credit for employees who can’t work because they’re taking care of someone with coronavirus, or if they are caring for a child whose school or childcare is closed (or their paid childcare provider is unavailable because of COVID-19). Those employees are able to get paid sick leave for up to two weeks (up to 80 hours) at 2/3 the employee’s regular rate of pay, or up to $200 per day and $2,000 in total, the IRS says.

Qualified employers may also get a tax credit for employees entitled to paid family and medical leave, worth 2/3 of the employee’s regular pay, or up to $200 per day and $10,000 in total. Plus, “up to 10 weeks of qualifying leave can be counted towards the family leave credit,” according to the IRS.

For paid sick and family leave credits, businesses must have fewer than 500 employees, and be required under the Families First Coronavirus Response Act to pay qualified sick and/or family leave wages.

If they qualify, employers will be able to receive a credit for the full amount of the required sick leave and family leave immediately, “plus related health plan expenses and the employer’s share of Medicare tax on the leave, for the period of April 1, 2020, through Dec. 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees,” according to the IRS.

How will businesses get the credits?

The IRS says employers can be reimbursed for the credit right away if they reduce required deposits of payroll taxes “that have been withheld from employees’ wages equal to the amount of the credit.”

To get the credits, eligible businesses can report their total qualified wages and the related health insurance costs for each quarter via their quarterly employment tax returns or Form 941 beginning in the 2nd quarter. Employers can receive an advance payment from the IRS if their employment tax deposits aren’t able to cover the credit, by submitting a Form 7200 (they can also submit this form to request an advance of the Employee Retention Credit).

Keep in mind: the tax deadline has been extended to July 15, 2020.

More must-read finance coverage from Fortune:

—Saving lives vs. saving the economy is a false tradeoff, economists say
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—17% of unemployed workers aren’t looking for work—and that’s warping the official unemployment rate
—Does Apple’s stock buyback strategy make sense in this market?
—Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus

Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic

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