The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments. In April 2021, IRS issued Notice 2021-24, which extends to the 2021 ERCs the penalty relief previously provided for in Notice 2020-22 for failure to deposit employment taxes if the failure was due to the reasonable anticipation of receipt of ERCs. Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. The IRS then issuedNotice 2021-23 as guidance concerning the employee retention credit for qualified wages paid for the first two quarters of 2021. From research to software to news, find what you need to stay ahead. (The additional guidance referenced in Notice 2021-23 regarding penalty relief is covered by Notice 2021-24.). #F JRI]*-9v#jhi@0>y"wS^ } ^#ReK)9g45Z--kf&I+cZc\=Ig,: Og49 PURPOSE. IRS issues guidance on employee retention credit for 2021 - EY IRS Clarifies Rules for 2021 Employee Retention Tax Credit Notice 2021-20 - Section III - Guidance for the Notice - ERC Additional Guidance on the Employee Retention Credit - Eide Bailly Notice 2021-23 provides the following key rules for the ERTC program for wages paid after December 31, 2020 through June 30, 2021: In addition to the specific issues discussed above, Notice 2021-23 includes further discussion of the rules for ERTCs claimed for the first two calendar quarters of 2021. In keeping with the Disaster Relief Act, Notice 2021-23 allows employers to claim any applicable amount of qualified wages up to the statutory cap, rather than limiting qualified wages to the employee's immediately preceding rate, as the CARES Act had originally required. Similarly, although the statute does not specifically state that recovery startup businesses may be treated as small eligible employers (those with 500 employees or fewer), the notice provides that Treasury and the IRS have concluded it is appropriate to read the small eligible employer rule in Sec. The gross receipts test is modified such that employers whose gross receipts in either the first or second calendar quarter of 2021 are less than 80% (up from 50% for ERTCs claimed in 2020) of their gross receipts for the same calendar quarter in 2019 are eligible for the ERTC. DETAIL. Rev. Proc. 2021-33: Safe harbor for employers - KPMG To celebrate the release of SEVENTEEN 2021 CARAT LAND, we've prepared a special event just for CARAT. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. . Special Issues for Employees: Income and DeductionQuestion 59L. Read . Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The IRS today released an advance version of Notice 2021-49 providing additional guidance regarding the employee retention credit. That is not otherwise eligible under the Gross Receipts or Suspension Tests. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. Section 3111(e) of the Code permits qualified tax-exempt organizations that hire qualified veterans to claim a credit against the employers share of social security tax imposed under section 3111(a) of the Code. Retroactive changes were made to the employee retention credit by a provision of theTaxpayer Certainty and Disaster Tax Relief Act of 2020(a division of the Consolidated Appropriations Act, 2021). endobj Employers should continue to monitor the IRSs interpretive guidance for upcoming guidance on ERCs paid pursuant to the American Rescue Plan Act (ARPA). Section III provides guidance in Q/A format (71 questions in all) on the following topics: A. There was a problem submitting your feedback. % Under the new notice, an ERC may be claimed by an eligible employer for qualified wages paid in the third and fourth calendar quarters of 2021. Notice 2021-20 includes the same examples as the website FAQs and also lists the following new factors to consider in making this determination: The Notice explains that gross receipts for both taxable and tax-exempt entities are based on the employers method of accounting. If a taxpayer has claimed the ERC in 2020 because of the retroactive amendment allowing PPP loan borrowers to claim the ERC or otherwise file an adjusted employment tax return (Form 941-X) to claim the ERC, the Notice makes clear that the taxpayer must file an amended federal income tax return or, if applicable, a partnership subject to the Centralized Partnership Audit Regime must file an Administrative Adjustment Request to reduce the deduction for the wages on which the credits were claimed. Question 29. While other legislation allowed businesses receiving SBA Loans under the PPP to obtain other relief, such businesses remained ineligible to claim ERCs until the CAA was passed in December 2020. IRS notices provide greater legal authority than do IRS FAQs. Notice 2021-20 specifies that the documentation should be retained for at least four years from the later of the date the tax becomes due or is paid. This notice amplifies Notice 2021-20, 2021-11 I.R.B. You recognize that our review of your information, even if you submitted Qualified wages are capped at $10,000 per employee per calendar quarter in 2021, meaning the maximum ERTC available per employee is $7,000 per quarter, and $14,000 in the aggregate for the first two calendar quarters of 2021. PDF Notice 2021-23: Employee retention credit, for first two quarters of 2021 That is, the maximum per-employee credit for all of 2020 was $5,000 whereas the maximum per-employee credit for the first half of 2021 is $14,000. Notice 2021-20 provides new guidance to eligible employers about the records they should retain to substantiate eligibility for ERCs, located within Section N (Answer 70, 71.) When read together, Notice 2021-20 and Notice 2021-23 provided employers with information to assist The limitations on receiving advance payments (Form 7200) are not likely to affect many employers, as that seems to have been the least common way employers have chosen to access the ERC. <> information as confidential. has more than a nominal effect. (Answer 17 (referencing Answer 18).). Questions 23-28. Red Notice (film) - Wikipedia The Internal Revenue Service (IRS) issued Notice 2021-23 on April 2, 2021, for employers claiming the employee retention tax credit (the ERTC) under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), as modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the Relief Act). 20.00 : Health Insurance . The ERC was enacted on March 27, 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) for wages paid from March 13, 2020 through December 31, 2020, by employers that (1) were fully or partially suspended due to COVID-19-related governmental orders or (2) experienced a more than 50% decline in gross receipts for the calendar quarter as compared to the same calendar quarter in 2019 (see Tax Alert 2020-0761). ] (Answer 16. 2023. Termination of employee retention credit - KPMG United States If only part of the PPP loan is forgiven, then the employer is deemed to make the election for the minimum amount of wages that are necessary to result in the forgiven amount. The Notice provides that cash tips received by an employee in a given calendar month amounting to $20 or more can be treated as qualified wages for ERC purposes assuming the other requirements are met. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP. in a matter where that information could and will be used against you. In general, any amount of payroll costs included on the PPP loan forgiveness application that are not needed for loan forgiveness can be used as ERC Qualified Wages by an ERC Eligible Employer (i.e., one satisfying either the government mandate or the significant decline in gross receipts test). Thompson Coburn LLP continues to monitor these important developments in the CARES Act and other Federal relief efforts. The Notice also clarifies other issues, particularly in determining if a governmental order limiting commerce, travel or group meetings due to COVID-19 results in a partial suspension of business operations. A governmental entity that is a college or university, or the principal purpose or function of which is providing medical or hospital care, is an eligible employer for purposes of ERTCs for wages paid in the first two calendar quarters of 2021. Guidance on the Employee Retention Credit under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act. Prior Ropes & Gray LLP coverage of ERCs includes alerts on the CARES Acts tax-related provisions, initial ERC guidance, CAAs tax-related provisions, and ARPAs tax-related provisions. For example, a governmental healthcare provider could now qualify for this expanded benefit if it is not exempt under IRC Sections 501(c)(3) and 170(b)(1)(A)(iii) and maintains a principal purpose of providing medical care. The Journal of Accountancy is now completely digital. Employers do not have to make any formal elections to calculate their gross receipts declines under the alternative method available to them, and they can continue accessing the credit by reducing their employment tax deposits or seeking refunds on an original or amended employment tax return. Solved Select the best answer. According to lan Redpath and - Chegg I. 1.6662-4(d). Section 2301 of the CARES Act allows a credit (employee retention credit or credit) against applicable employment taxes for eligible employers, including tax-exempt organizations, that pay qualified wages, including certain health plan expenses, to some or all employees after March 12, 2020, and before January 1, 2021. Answers 56, 57, and 58 also contain information on interaction with the PPP. {[.D)I}QE'i4PVUF$DpmU(l 7 Before addressing the guidance contained within the Notice, its important to note that the Senate, as a means of funding the bipartisan infrastructure bill (see our previous tax alert, Bipartisan infrastructure bill moves forward), has proposed ending the employee retention credit (ERC) program three months early (i.e., eliminating the credit for the fourth quarter of 2021). Notice 2021-23 - ERC Specialists Knowledge Base 0 4 0 obj gtag('js', new Date()); in the case of a large eligible employer, work records and documentation showing that wages were paid for time an employee was not providing services. (Answer 58. As amplified by Notice 2021-49, the rules set out in Notices 2021-20 and 2021-23, which provided guidance under the ERC as enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 3231(e)(3) and they otherwise meet the requirements for qualified wages); the timing of the disallowance of a deduction for wages by the amount of the ERC; the alternative quarter election in determining whether there has been a decline in gross receipts; and how to calculate gross receipts of employers that came into existence in the middle of a calendar quarter for purposes of the gross receipts safe harbor in Section III.E of Notice 2021-20. The key exception to this is the hours lookback rule applicable to large employers set forth in Notice 2021-20. The changes generally have an effective date of January 1, 2021. Notice of the Random Delivery of New and Old Alipay Materials. A non-exhaustive list of modifications include limiting occupancy to provide for social distancing, requiring appointments for service instead of walk-in service, changing the format of service, and requiring employees and customers to wear face coverings. Read ourprivacy policyto learn more. Accordingly, wages paid by Corporation C to Individual J and Individual K in the first calendar quarter of 2021 may be treated as qualified wages if the amounts satisfy the other requirements to be treated as qualified wages. As originally enacted, the CARES Act prohibited employers that received PPP loans from claiming the ERC. Significant Decline in Gross ReceiptsQuestions 23-28F. Notice on Suspending Settlement During Labour . An employer that was not in existence during 2019 can use the relevant quarter in 2020 for the reference period, and. Under the website FAQs, a partial suspension does not occur if an employer's workplace is closed by a governmental order but the employer is able to continue operations comparable to its pre-closure operations by requiring employees to telework. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Notice 2021-20 also provides new guidance regarding substantiation requirements. Notice 2021-23 incorporates the changes made by Section 207 of the Disaster Relief Act and applies to qualified wages paid in the first two quarters of 2021. The Internal Revenue Service ("IRS") issued Notice 2021-23 on April 2, 2021, for employers claiming the employee retention tax credit (the "ERTC") under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), as modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the "Relief Act"). <>/ExtGState<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> Eligible EmployersQuestions 1-6B. TaxNewsFlash. 501(a) and (c) may qualify for the ERC) does not specifically provide that these organizations can be an eligible employer due to being a recovery startup business, the IRS and Treasury have determined it is appropriate to treat them as eligible employers if they meet the requirements to be a recovery startup. On April 29, 2020, the IRS posted over 90 ERC FAQs on its website. Notice 2021-49 and guidance for the third and fourth quarters of 2021 . Notice 2021-23 explains that additional guidance will be published regarding the ARPA ERCs. Individual G has the relationship to Individual H described in section 152(d)(2)(C) of the Code. Notice 2021-23 . For more 116-127, 134 Stat. Qualified wages are capped at $10,000 per employee per calendar quarter in 2021, meaning the maximum ERTC available per employee is $7,000 per quarter, and $14,000 in the aggregate for the first two calendar quarters of 2021. For the first two quarters of 2021, employers are eligible for the ERC for one or both quarters (determined separately) that their gross receipts are less than 80% of their gross receipts for the same calendar quarter in 2019. Aggregation Rules IIF. The rules for determining qualified wages provided in Section III.G. Additional guidance on miscellaneous issues that apply to the employee retention credit in both 2020 and 2021, Qualified wages after June 30, 2021, and before January 1, 2022. Section 206 of the Disaster Relief Act narrowed the limitation so that employers receiving PPP loans may elect to treat payroll costs paid during the loan-covered period as qualified wages to the extent the wages are not paid with forgiven PPP loan proceeds. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. IRS issues additional ERC guidance - Baker Tilly G,-TSs7re%Z3n ^Y\-]]ZxA.w-qj;so[6|S(#.JIxhk:s5 ^WhF5f l\U]0 The IRS issued Notice 2021-49 Wednesday that includes guidance on the extension and modification of the employee retention credit (ERC) under Sec. Notice 2021-20 specifies the records that employers should maintain to substantiate eligibility for the credit. IRS clarifies employee retention tax credit rules for Q1 and Q2 of 2021 8 CONTACT 19. Notice 2021-23 was subsequently issued with guidance concerning the employee retention credit for qualified wages paid for the first two quarters of 2021. Notice 2021-20 provides new guidance regarding PPP loans and substantiation requirements, and clarifies previously issued FAQs in a way generally consistent with the prior FAQs by: The 2020 ERCs are a fully refundable tax credit equal to 50% of qualified wages paid to employees by eligible employers. For the 2020 ERCs, qualified wages are capped at $10,000 per employee, and, subject to exceptions, eligible employers are employers that either fully or partially suspended operations due to orders from an appropriate governmental authority related to Covid-19 or experienced a significant decline in gross receipts of 50% or more during a specified period. A taxpayer becomes an Eligible Employer if the trade or business suspended constitutes more than a nominal portion of business operations. Notice 2021-20 implements the CAAs change, with Section I (Answer 49) dedicated to explaining the interaction between ERCs and the PPP. ), Notice 2021-20 formalizes previously issued guidance that had explained that a business whose workplace was closed by government orders was not considered suspended if it could continue operations comparable to its operations prior to the closure[. Documentation to show how the employer determined it was an eligible employer that paid qualified wages, including: any governmental order to suspend the employers business operations; any records the employer relied upon to determine whether more than a nominal portion of its operations were suspended due to a governmental order or whether a governmental order had more than a nominal effect on its business operations; any records the employer used to determine it had experienced a significant decline in gross receipts; any records of which employees received qualified wages and in what amounts; and. Notice 2021-49: Guidance for employers claiming ERC - KPMG The guidance, however, is very taxpayer unfriendly as it, in effect, provides that majority owners and their spouses can only treat their wages as qualified to the extent they do not have any living related individuals (ancestors, lineal descendants, siblings and step-siblings, aunts and uncles, nieces and nephews, in-laws, or other individuals) sharing the same principal place of abode as the taxpayer. The rules for determining qualified wages provided in Section III.G. Alipay Portal Help Center Upgrade Notice. Log in to keep reading or access research tools. All rights reserved. In short, if the majority owner has any living family other than their spouse (by blood or marriage), their wages cannot be qualified. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. 117-2. Corrigendum to Public Notice No. This is the second of published guidance from the IRS on the ERC (third if you count the initial IRS website FAQs) and yet more guidance is expected. . On the whole, the additional insight is largely consistent with prior guidance issued by the IRS. 209 0 obj <>stream under the facts and circumstances. (Answer 17, FAQ 34.) about any matter that may involve you until you receive a written statement from 116-136, 134 Stat. IR -165 (August 4, 2021) briefly explains that Notice 2021-49 addresses changes made by the American Rescue Plan Act of 2021to the employee retention credit. Cheat Sheet: Federal Notice 2021-20 - ERC Specialists Knowledge Base Example 3: Corporation C is owned 100 percent by Individual J.Corporation C is an eligible employer with respect to the first calendar quarter of 2021.