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IRS Releases Employee Retention Credit Guidance for 3Q and 4Q 2021

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On August 4, 2021, the IRS released guidance on the Employee Retention Credit (ERC) as it applies to qualified wages paid in the third and fourth quarters of 2021. Notice 2021-49 also provides further guidance for various issues related to the ERC in both 2020 and 2021.

The ERC is a credit provided under section 2301 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was then amended by the Taxpayer Certainty and Disaster Relief Act of 2020 as well as the American Rescue Plan Act of 2021 (ARP).

Notice 2021-49 provides additional guidance on claiming the ERC for qualified wages paid after June 30, 2021, and before January 1, 2022.

Notably, it:

  • Provides guidance for employers who may qualify to claim the ERC as a “recovery startup business”
  • Explains the definition of qualified wages for “severely financially distressed employers”
  • Provides explanations of miscellaneous issues regarding the ERC in both 2020 and 2021, including guidance on:
    • The definition of full-time employees for determining whether an employer is a large or small employer;
    • Whether part-time employee wages may be included as qualified wages; and
    • Whether an employer who chooses to use the alternative quarter election to determine a significant decline in gross receipts must continue to use that election throughout the year

Please contact us with any questions.

 

Additional Resources:

IRS Releases Employee Retention Credit Guidance for 1Q and 2Q 2021

IRS Releases Guidance on the Employee Retention Credit for 2020 Wages

Recorded Webcast: The Employee Retention Credit and Nonprofit Organizations

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