Additional Guidance on the Employee Retention Credit

by Jim Donovan, CPA

The IRS recently released additional guidance on the Employee Retention Credit (ERC) in Notice 2021-49 and in Rev. Proc. 2021-33. Notice 2021-49 provides guidance for claiming the ERC in the third and fourth quarters of 2021 as well as providing clarification on previously unanswered questions. Rev. Proc. 2021-33 provides guidance on the exclusion of forgiven Paycheck Protection Program (PPP) loan proceeds and other incentives from the calculation of gross receipts, solely for purposes of the ERC.

Here’s what you need to know about the changes to the Employee Retention Credit program.

What is the Employee Retention Credit?

The ERC was originally enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and has been extended twice, first as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act) and second as part of the American Rescue Plan Act (ARPA).

The ERC is a refundable tax credit of up to $5,000 per employee for 2020. For 2021 the ERC can be up to $7,000 per employee per quarter. The ERC is available to businesses and other employers, including nonprofit organizations, that have been fully or partially suspended by a government order or had a significant decline in gross receipts.

Read the entire article at EideBailly: https://www.eidebailly.com/insights/articles/2021/8/additional-guidance-on-the-employee-retention-credit