The IRS recently issued further guidance on the employee retention credit. This includes guidance for employers who pay qualified wages after June 30, 2021, and before January 1, 2022, and guidance on miscellaneous issues that apply to the employee retention credit in both 2020 and 2021. Additionally, the IRS issued a safe harbor allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the employee retention credit.
Notice 2021-49 addresses changes made by the American Rescue Plan Act of 2021 to the employee retention credit that apply to the third and fourth quarters of 2021.
Those changes include:
This guidance also answers various questions about the employee retention credit for tax years 2020 and 2021, including:
Revenue Procedure 2021-33 provides a safe harbor permitting employers to exclude certain amounts from gross receipts solely for determining eligibility for the employee retention credit. These amounts are:
An employer elects to apply the safe harbor by excluding these amounts solely for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the employee retention credit on its employment tax return.
Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their employment tax returns, generally, Form 941 Employer's Quarterly Federal Tax Return, for the applicable period. If a reduction in the employer's employment tax deposits is not sufficient to cover the credit, certain employers may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.
FAQs Employee Retention Credit under the CARES Act
Frequently Asked Questions on Tax Credits for Required Paid Leave Coronavirus Tax Relief
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